$WMT calls soar in just one week

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Bullish option traders racked up huge profits as Wal-Mart rallied sharply on its annual investor day.

On Oct. 3, Investitute’s market scanners found that 5,100 Weekly $80 calls that expire this Friday were purchased for $0.92 to $1.36 with shares at $79.48. Volume was well above the strike’s open interest of 1,327 contracts, indicating that this is fresh buying.

Today those calls traded up to $4.90, more than 5 times their original purchase price. The stock rose 6.6 percent in the same time frame, underscoring how quickly option can far outperform their underlying shares. Investitute co-founder Jon Najarian discussed Wal-Mart’s big move on CNBC’s “Halftime Report” This afternoon.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

WMT jumped 4.47 percent today to close at $84.13 after hitting a 52-week high of $84.87 in the final hour of the session. This morning the retail giant announced a $20 billion stock-buyback program while reaffirming its fiscal 2018 outlook.

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Mike Yamamoto | Investitute

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