Walmart: Earnings In Focus

Retail Earnings Week

This is a big week for consumer data, as we have earnings reports from many important retail names, including Home Depot (which reported this morning), Target (TGT), TJMaxx (TJX), Walmart (WMT), and more. Yesterday, I stopped by TraderTV LIVE to discuss these, and more. Click here to check out the segment!


We discussed a few of these tickers on the show, but here is the complete watchlist for top Earnings in Focus tickers to trade in the options market this week below:


Walmart: Earnings Hot Zone Stats

Walmart reports earnings on Thursday, August 17th, before the bell.


Walmart has had a strong performance this quarter and year overall, with a positive trend in its stock price. Despite high inflation, people are still spending money at Walmart, primarily on groceries and cheap items instead of TVs, indicating a potential shift in consumer behavior. Walmart’s reliance on groceries and essentials, which comprise 60% of its annual U.S. sales, positions it well for the shift in consumer preferences towards these items.


When analyzing the options market and pricing, the market has priced in a 3.6% move for Walmart’s stock, and a move larger than that is considered more significant than expected. Analyzing the last 12 quarters shows that there has only been an overnight gap greater than 3.6% 4/12 quarters. This means that while Walmart has some outsized moves from time to time, in general, it stays within the expected move. You can also see that it’s pretty back and forth as it relates to the post-earnings gaps. Half of the time it’s up, and half of the time it’s down. This is generally a good sign that placing a neutral trade is the best bet.



Trading Walmart

So, what am I doing with the stock? I own the shares in my long-term investment accounts, but I’m also going to trade options over the earnings report. I’m planning on selling a neutral, risk-defined spread to trade overnight IV crush and premium decay. I outline my trade idea in the video below:



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