BY MARK SEBASTIAN
May 20, 2024
REPLAY
TRADE IDEA
Each week, my team will give an overview of a stock. I’ll discuss fundamentals, Licia will analyze the charts, and AG will break down the volatility.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Trader,
What company sells more than any other company in the world….NO…it is not Amazon…it is still Walmart. Walmart recently had GREAT earnings…get on board or get out…
Let’s break it down.
An option term got you down? Check out our Glossary here.
Walmart Inc (Ticker: WMT)
If you had asked me 6 months ago if I thought Walmart was a buy I would have said heck yes…
But a lot has happened since then:
The stock is up 11 bucks in the last 6 months.
The metrics on WMT have changed…it now has a PE of over 31 and sports a market cap over 500 billion dollars.
Compared to Amazon, Walmart is cheap…yes it is … .but relative to Walmart…the stock is getting pretty rich.
That said….Amazon has a PE of 52…and is worth 1.94 Trillion dollars.
I am now a Walmart Plus Subscriber…it is basically the same experience as being on Amazon. I am impressed.
My retail Gauge: Lauren Sebsastian of BigBlondeHair.com Fame actually had me buy something from Walmart TODAY!
Long term, PE expansion ends…near term…Walmart is probably going to 70…Id buy calls.
-Mark
Walmart (Ticke: WMT) just had a huge earnings gap and guess where it landed … you know it … right on the pitchfork resistance:
Where does it go from here, you ask?
Well, as with any gap, you want to wait for the stock price to reveal itself.
You need a few days for the stock to consolidate, trade higher or roll lower.
My educated guess is that after a few days consolidating, WMT will trade up to the top of the pitchfork at $67.
Support comes in at the low of the top of the gap, $62.94.
Long term declines in IV from the Covid Crisis
Since implied volatility (IV) peaked in 2020 from the last volatility event, traders have been wondering how long it would take to get back into lower VIX levels and what that would look like. Well it is here now as long term IV trends, and longer term IVs are getting to lower levels.
For most S&P 500 stocks this is an opportunity to buy cheap options in a bull market. WMT is running to all time highs with very low long term IV. That is usually a recipe for bullish long term option positions.
2 year 60 day and 90 day IV charts
I want to grab summer time positions looking for a slow grind higher in WMT. We trade call calendars or diagonal call calendars. More aggressive trades would be a long strangle with out of the money puts. When IV gets this cheap, think of ways to buy it.
-AG
Out on Assignment
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Mark Sebastian
Founder & CEO, Option Pit
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CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
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