Walmart has been a massive out-performer in 2016, up 18% ytd vs the S&P 500 (SPX) up a tad less than 7%, and the S&P Retail etf up 7.5%.
Call volume is running hot today at nearly 2.5x average daily volume, most coming in one bullish roll. Shortly after the open, when the stock was $72.25 , a trader sold to close 20,000 Sept 75 calls at 12 cents, and bought to open 20,000 Sept 72.50 calls for 89 cents. The new calls break-even at $73.39, up only 1.5% from the trading level.
While this appears to be a trader rolling a near term bet, it’s really hard to tell. So I’ll offer my usual disclaimer. Without knowing intimate knowledge of the trader’s intent, or what the options may be against, trading off this information is difficult. For instance, this could be a hedge against a 2 million share short position.
Without any scheduled events, the likelihood of continued slow trading between now and after the Labor Day weekend, long premium strategies appear to be a dead bang loser in this environment. But if the trader was looking for near term long exposure, options prices are indeed cheap, with 30 day at the money implied vol just off of 52 week lows:
But in this sort of trading environment, cheap can get cheaper.
On a longer time horizon, defined risk longs make sense in lieu of stock given the technical set up, as the stock just broke the uptrend that had been in place from the 52 week lows made in November. While there appears to be some near term support at $70, the prior breakout level, there is an air-pocked below to $65:
Again what seems most odd about this trade if merely rolling down a bullish bet is the choice of Sept expiration where there are no scheduled events that could catalyze the stock. On October 6th the company will hold their annual analyst meeting which was the result of a great deal of volatility when the company lowered guidance last October. But between now and September expiration, this trader is either rolling a hedge vs a large short, or trying to cost average to a lower strike in a bullish bet with hopes of getting lucky between now and Sept expiration.