WMT Analysis

Wal-Mart Stores Inc. (WMT)

Update 8/17/2017: WMT’s earnings came in spot on the analyst expectations, at $1.08 per share. Zacks Investment Research had given a 0.94% earnings surprise predictor score.

The stock fell in pre-market trading and then began to rise after the opening bell. I exited the contracts at a $2.21 debit, or 24.8% of maximum potential profit, with shares at $79.11.

Shares declined by 2.2% over one day, or a -819% annual rate. The options position produced a 33.0% return for a +12,057% annual rate.

WMT publishes earnings on Thursday before the opening bell.

I shall use options that trade for the last time nine days hence, on Aug. 25.

Implied volatility stands at 22%, which is 1.9 times the VIX, a measure of the volatility of the S&P 500 index.

WMT’s IV stands in the 72nd percentile of its annual range and the 88th percentile of its most recent broad movement.

The price used for analysis was $80.87.

Premium: $2.94 Expire OTM  
WMT-iron fly Strike Odds Delta
Long 87.00 93.8% 7
Break-even 83.94 ~79.0% ~23
Short 81.00 51.9% 50
Short 81.00 48.1% 50
Break-even 77.94 ~75.0% ~23
Long 75.00 91.1% 8

The premium is 49% of the width of the position’s wings.

The risk/reward ratio is 1:1.

The expected move is $2.56 either way, within the $3 break-even width.

Decision for My Account

I have entered an order on WMT as described above. The stock at the time of entry was priced at $80.93.

By Tim Bovee, Portland, Oregon, Aug. 16, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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