Is Christmas Coming Early for Walmart?

With the S&P 500 at another all-time high it is hard to find bargains in the big-name stocks. The oil industry is on its heels with a longer recovery, but just about everything else is jumping at this point.

VIX is low. The VIX has not been in the 11 handle for any sustained period of time in 2019 and we might see a few days of that this week. That makes me look for cheap options with some time to expiration.

A retailer that has some strength but pulled back from earnings is Walmart (WMT) . The company's stock is about $6 off its highs and it had a great earnings report.

The pullback feels a bit overdone from the earnings highs as Walmart becomes a legitimate contender in the e-commerce area. WMT's implied volatility (IV) is the lowest it has been in several months and is touching lows Tuesday.

I think the January cycle makes sense on a bullish trade as the holidays approach and traders look for cheaper names that have pulled back from highs.

The WMT January calls are pretty cheap, partly from the dividend coming, but could catch a nice ride through the holidays into the ex-dividend date on Dec. 5. I would like to hold these into mid-December and January will decay slower than a December call.

Trade:

Buy 3 WMT Jan17 $120 calls for about $2.00.

I would close them on a run to the earnings highs around $125 or on a pullback if the calls trade $1.25 and we get no move into the holidays.

At the time of publication, Sebastian held a similar WMT position.