Retail giant Walmart (WMT) is up 17% in the past year, slightly underperforming the overall market. One trader sees shares pulling back by the end of the month.
That’s based on the May 31 $59 puts. With 23 days until expiration, 6,514 contracts traded compared to a prior open interest of 154, for a 42-fold rise in volume on the trade. The buyer of the puts paid $1.23 to make the bearish bet.
Shares recently traded for just under $60, meaning the stock has to decline less than $1 or less than 2% for the option to move in-the-money.
Walmart trades near its 52-week high of $61.65, but has been gradually trending lower in the past few weeks.
Besides the slight trend lower, Walmart next reports earnings on May 16. Any weakness in consumer spending could lead to a miss, sending the stock lower.
Action to take: Investors may want to wait until after earnings before buying shares, as Walmart may see a downtrend through its earnings report.
Plus, shares are still on the expensive side at 31 times earnings, and the 1.4% dividend isn’t the highest investors can usually get from shares.
For traders, the May 31 puts are well-timed for any further market weakness this month and a possible drop from earnings season.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.