Walmart (WMT) stock was up nearly 9% in pre-market trading Thursday after the retailer reported better-than-expected Q2 2025 earnings and revised its guidance higher for the remaining two quarters of 2024.
I'm not particularly surprised by Walmart's results. The business has been running reasonably efficiently for some time. Sure, like every retail business, you're going to be able to find weaknesses in its second-quarter report, but generally, if you're looking for a safe haven in a volatile market, Walmart has to be near the top of your list.
It earned 67 cents in the quarter, two more than Wall Street’s estimate. Its revenue of $169.3 billion was $700 million higher than the consensus. Its U.S. same-store sales rose 4.2%, 60 basis points higher than analyst expectations. Canada, where I live, had net sales of $6.0 billion, 3.5% higher than a year ago, with 3.4% same-store sales growth. That’s impressive, given that the Canadian economy isn’t quite as strong as America’s.
I’ll get to more about the business in a moment, but first I want to cover Walmart’s unusual options activity from yesterday. It’s worth taking a closer look.
Walmart Had 12 Unusually Active Options
Walmart had 12 unusually active options yesterday -- defined as a Vol/OI ratio greater than 1.24 and expiring in a week or more -- with five calls, seven puts and an average volume of 3,203 for the 12.
Walmart’s total options volume on Wednesday was 293,851, 3.3x its 30-day average. The last time it had volume this high was May 16 (482,651), and that was due to Q1 2025 earnings.
Returning to the 12 unusually active options, one jumped out from the rest with a Vol/OI ratio of 76.70, the fourth highest in yesterday’s trading.
The $65 call was in the money at the close. Add in the $4.45 ask, and it only needs to appreciate by $0.79 (1.2%) in the next nine days to make it worthwhile to exercise your right to buy 100 WMT shares.
Further, based on the delta of 0.79546, the share price only needed to appreciate by $5.59 (8.1%) for you to double your money on the call by selling before expiration on Aug. 23. Best of all, the down payment was just 6.8%.
It was a no-brainer if you were bullish heading into this morning’s earnings report. Worst-case scenario, you lose $445.
When I started writing this piece, it was pre-market. We’re now nearly a half-hour into trading, and the latest ask price for the $65 call expiring in nine days is $7.90, 77% higher than yesterday’s close. Walmart’s stock is still up 7.8%.
Someone Bit Hard Around 1:30 Wednesday
As you can see below, someone bought 4,123 Aug. 23 $65 calls at 1:30 p.m. The trade was at $4.15 a contract. Based on the $7.90 ask, that person or company is sitting on a potential profit of $1.55 million. If they could get the $7.90 trade to sell the calls, the annualized return would be 32,996%.
Any takers?
I’ve been writing about options for over two years now, and like I always say, I’m a newbie when it comes to these things. I know very little about these mysterious creatures, but the more I write about them, the more I see their usefulness for legitimate investors, not just speculators.
At least, to my minimal understanding, options seem ideal for event-driven bets.
Case in point: If you heard rumors last week that Starbucks (SBUX) was going to replace their CEO, even if you didn’t know the replacement would be Chipotle’s (CMG) CEO, Brian Niccol, it would be an inexpensive way to bet on SBUX stock moving higher on the news.
You didn’t have to be a rocket scientist to know that Starbucks hadn’t been performing at a level anywhere near optimal. That fact was reflected in its share price--down 28% from its 52-week high of $107.66 in November to the last closing price ($77.03) before the news came out.
Because I’m a newbie, I realize plenty of people reading this are doing what I’m suggesting: betting on specific events within a certain timeframe.
These people, in a word, are very “smart.”
Walmart as a Long-Term Bet
As I finish writing today’s commentary about unusual options activity, Walmart’s share price continues to drift lower. It opened at $74.12, up just under 8%, hit an all-time high of $74.44, and is currently trading around $73.12, up 6.5%. The S&P 500 is up more than 1%, so it’s a good day.
As I said in the introduction, Walmart is a safe haven in a relatively volatile market.
Walmart CEO Doug McMillon had very positive things to say about its overall business in the Q2 2025 press release.
“Each part of our business is growing – store and club sales are up, eCommerce is compounding as we layer on pickup and even faster growth in delivery as our speed improves,” McMillon stated.
“Our newer businesses like marketplace, advertising, and membership, are also contributing, diversifying our profits and reinforcing the resilience of our business model.”
I’ve followed Walmart for many years, and although I’ve never owned its stock, as far as I can tell, the business has never been in better shape, both in the core business and future opportunities such as advertising.
However, you might hesitate to buy because of its current valuation.
Based on the company’s guidance for 2025—adjusted EPS of $2.39 at the midpoint—it trades at 30.6x this estimate. According to S&P Global Market Intelligence, its P/E multiple is higher than at any time in the past decade.
So, if valuation holds you back, options make sense to lower your risk as you seek a better entry point. If you feel quality costs more and are prepared to hold for the long haul, Walmart at these levels shouldn’t harm you in 5-10 years from now.
Walmart’s a long-term buy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
