WMT November 21st Options Begin Trading

Stock Options Channel analyzes potential options strategies for Walmart (WMT), highlighting a $70 put contract where selling-to-open offers a potential 0.93% return if it expires worthless, with a 94% probability based on current data. Additionally, a covered call strategy using the $100 call contract could yield an 8.85% return if the stock is called away, or a 6.88% premium if it expires worthless, with a 47% probability. The implied volatility for the put and call options are 37% and 26% respectively, while the trailing twelve month volatility is 24%.

Analysis

The provided information details two distinct options strategies for Walmart Inc. (WMT), which is currently trading at $98.07 per share. The first strategy involves selling-to-open a put contract at a $70.00 strike price, with a current bid of $0.65. This action commits the seller to purchase WMT shares at $70.00 if the option is exercised, but the premium received effectively lowers the cost basis to $69.35 per share (before broker commissions). This $70.00 strike is approximately 29% out-of-the-money, and current analytics suggest a 94% probability that this put contract will expire worthless. Should this occur, the collected premium would represent a 0.93% return on the cash commitment, or a 1.94% annualized return, termed 'YieldBoost' by Stock Options Channel. The second strategy is a covered call for existing WMT shareholders, involving the sale of a call contract at the $100.00 strike price, with a current bid of $6.75. If WMT stock is called away at the November 21st expiration, this would result in a total return of 8.85% (excluding dividends and before broker commissions), based on the current share price of $98.07. This $100.00 strike is approximately 2% out-of-the-money, and there is a 47% probability, according to current data, that the call contract will expire worthless. In such a scenario, the investor retains their shares and the collected premium, which amounts to a 6.88% 'YieldBoost' or 14.35% annualized. The implied volatility for the put contract is reported at 37%, while the call contract's implied volatility is 26%. For context, Walmart's actual trailing twelve-month volatility, calculated using the last 250 trading day closing values and the current price, is 24%.

Key Decisions for Investors

• Investors interested in acquiring Walmart shares at a potential discount to the current market price of $98.07 could consider selling the $70.00 strike put, thereby establishing a cost basis of $69.35 if assigned, while acknowledging the 94% probability of the option expiring worthless for a 0.93% premium return.
• Current Walmart shareholders seeking to generate additional income from their holdings might evaluate the covered call strategy using the $100.00 strike, which offers a potential 8.85% return if shares are called away by November 21st, or a 6.88% premium retention if the option expires worthless.
• Traders should note the discrepancy between the put option's implied volatility (37%) and Walmart's historical volatility (24%), which may offer an attractive premium for put sellers if they anticipate volatility remaining subdued, whereas the call option's implied volatility (26%) is more closely aligned with historical levels.