Time To Play The Upside With WMT Stock? | IBD

TL;DR

This video discusses a bullish trade strategy known as a bull put spread on Walmart stock, taking advantage of its potential upward movement.

Transcript

foreign ERS for today's trade we're looking at a bull put spread in Dow Jones component Walmart so taking a look at the stock on Market Smith Walmart has been trading sideways for several months now shares formed a new base next to a cup with handle the current base could be interpreted in a few ways one of which is to use the 148 44 by point the s... Read More

Key Insights

• 🥳 Walmart stock has been in a sideways trading pattern, but recent volume and a break above the 50-day moving average suggest potential upward momentum.
• 📽️ Earnings for Walmart have been accelerating, and analysts predict future growth despite a projected decline in 2023.
• 🚄 A bull put spread is a risk-defined strategy to get long on a stock, with the goal of the stock price staying above the higher strike price.
• 👾 Longer-term options can offer a more steady-paced trading strategy.
• 🚄 The chosen bull put spread trade on Walmart involves selling a 130 strike put and buying a 125 strike put with a maximum risk of $420.
• 😥 The break-even point for the trade is set at $129.20.
• 🌸 Losses can be managed by setting a stop-loss point or limiting losses to the amount of premium received.

Questions & Answers

Q: What is the purpose of a bull put spread trade?

A bull put spread is a way to get long on a stock, involving selling one put and buying a lower strike put. The goal is for the stock price to stay above the higher strike price to retain the full premium.

Q: Why is a longer-term option chosen for this trade?

Longer-term options tend to move slower than shorter-term ones, allowing for a measured strategy. In this case, the September 15th expiration is used.

Q: What is the break-even point for this trade?

The break-even point is calculated as 130 minus the premium per contract, which in this case is 129.20. The stock must stay above this price for the trade to be profitable.

Q: How can losses be managed in this trade?

A stop-loss or adjustment point should be set if Walmart drops below 135. Another rule of thumb is to limit the loss to the amount of premium received, which is $80 in this trade.

Summary & Key Takeaways

• Walmart stock has been trading sideways for several months, forming a new base next to a cup with a handle.

• Strong volume and a break above the 50-day moving average indicate bullish signs for the stock.

• Earnings have been accelerating, with a predicted decline in 2023 followed by growth in 2024.