Skip to main content

WalMart’s warning leaves option investors in a flurry

Today’s tickers: WMT, SHLD, WFC, SGR, ELN & SAP WMT – WalMart Stores Inc. – Investors are likely asking at what cost WalMart managed to make itself look successful over the holiday season as it today slashed earnings forecasts for the year. The move was industry wide as consumers keep their pocket books firmly shut. The revelation sent its shares lower by 7.7% by lunchtime to $51.30, but option traders didn’t really seem to be betting on much larger declines. Rather it appeared that they were making the bold assumption that its shares might reel right now as they dabbled in at-the-money January put options, but the tone one month further was more buoyant with selling predominant at strikes as low as 42.5 through 47.50. There was good two way action at the 50 strike. SHLD – Sears Holdings – Shares rallied 20% to $48.39 as Sears revealed that its sales had been okay for the holiday season with its “layaway” strategy at Kmart working well in keeping sales stronger than other retailers. Upside potential for its shares was capped in the view of option traders who bought January 50 strike calls but sold those at the 55 strike. In the February contract investors appeared more optimistic and bought both strikes where premiums of 1.80 were paid at the higher strike. In trading that suggests some stock holders might be thanking their lucky stars for today’s over-sized rally, some option traders bought January puts at the 35 and 45 strikes for fear of any giveback following today’s move. Implied volatility declined to accompany today’s share price gain falling from 93 to 83%. WFC – Wells Fargo & Co. – Option strategists continue to figure out ways of playing the current decline at Wells Fargo, where late yesterday its CEO admitted that there would be job cuts following the acquisition of Wachovia. Some 20,000 workers have just been absorbed around the Charlotte-based hub of its operations. One investor maintained a bear stance using put options, which were rolled from the January 25 strike to the February 25 strike. The cost of rolling that insurance today was a net 2.45. Shares declined once again to $25.64. Option implied volatility declined a little to 98%, which doesn’t seem to match larger declines in January premium. Another interesting play today involved a credit spread in the April contract where an investor seems to be confident that the share price will…
Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.