Wal-Mart Stores, Inc (WMT) is a global retailer with stores in the U.S. and 26 countries around the world. The company’s stock is currently trading around $78.70 in a 52 week range of $67.37-$79.96. The stock has been performing well this year adding over 15% to share prices year to date. WMT is set to report their most recent quarterly earnings tomorrow before the open. Despite the stocks strong performance this year it has been relatively weak on earnings day. Shares of WMT sold off on earnings day 6 of the past 8 quarters with an average move of around 3%. Although WMT is trading above the Ichimoku Cloud, indicating shares are trading in bullish territory, the weakness the stock shows on earnings day means we can only look to get short WMT ahead of earnings. With the options market implying around a 2.5% move by this Friday’s expiration we can calculate a downside target of $77.00 for Friday’s close. Using this target we can now set up a trade.
Trade: Buying the WMT Nov 77.5-76 Put Spread for $0.35
Risk: $35 per 1 lot
Reward: $115 per 1 lot
Breakeven: $77.15
