Walmart Stock Calls Offer Value Amid Strong NASDAQ:WMT Performance
Walmart Inc. (NYSE: WMT) has shown remarkable performance in the stock market, gaining approximately 11% year-to-date. This rise can be attributed to the retailer’s expanding influence in essential sectors like groceries and healthcare. Despite its positive trajectory, investors are cautious, concerned about the stock potentially being overheated.
Amid fluctuations in the economy, driven by artificial intelligence impacts and tariff pressures, Walmart’s focus on essential services positions it favorably. As discretionary spending faces scrutiny, necessities such as groceries and healthcare are less susceptible to economic downturns. This dynamic suggests that Walmart’s push into health services demonstrates resilience in challenging market conditions.
Impressive Long-Term Gains
In the last year, Walmart’s stock has surged nearly 24%, exceeding the S&P 500’s increase of less than 17% and outperforming the tech-heavy Nasdaq Composite, which rose 22%. This performance indicates that institutional investors are showing interest in protective strategies, employing options to hedge against potential downturns.
Understanding Stock Volatility
The dynamics of the market suggest that options traders are focusing on downside protection while exploring upside potential through relatively inexpensive call options. According to statistical analysis using the Black-Scholes model, the expected price range for WMT stock could be between approximately $117 and $130, with a 68% probability of staying within this interval.
With an upcoming earnings report set for February 19, it’s anticipated that WMT’s disclosures will not trigger significant volatility. However, in the past ten weeks, Walmart has experienced a positive trend, with seven weeks of gains contributing to an upward shift.
Projected Stock Performance
Based on careful analysis, WMT’s stock is expected to range between $121 and $127 over the next five weeks. The most probable trading price could hover between $124.50 and $125.30, indicating a targeted investment strategy.
Strategic Options Trading
- Consider employing a 124/126 bull call spread expiring on February 20, 2026.
- This involves buying a $124 call option and selling a $126 call option.
- The total net debit is $106, representing the maximum loss.
If Walmart’s stock reaches the $126 strike by expiration, the potential maximum profit is $94, equivalent to a return of almost 89%. The breakeven point is estimated at $125.06, aligning with projected price concentration.
As earnings season approaches, investors might opt to exit their positions early to secure profits, acknowledging the unpredictable nature of earnings reports.
