Why the Option Market is Bullish on Walmart (WMT) Stock

Moreover, there is the baseline effect. People who shop at Walmart because they have to aren’t adversely affected by more economic challenges. They’re already at the most discounted store on the market, and there’s nowhere lower. When you’re at the bottom, there is no lower, and the only way is up.

Second, Walmart, being a massive retail giant, can potentially flex its muscles with its suppliers. Sure, with tariffs, inflation, and other high-level dynamics, the consumer usually pays the price. However, Walmart could influence its suppliers to help pick up the tab. Since the company owns the floor regarding enticing discounts, it commands considerable leverage.

Finally, the tariff issue might not be the death sentence on WMT stock that some pessimists think it is. In 2019, Walmart said it would raise prices due to the trade war with China under Trump 1.0. Even with that stark warning, WMT was no worse for wear.

Of course, every circumstance is different, but WMT stock is relevant because the underlying business represents a critical lifeline for millions of families. That’s a catalyst investors should be able to bank on over the long run.

The security’s upward bias is another factor that warrants bullish consideration of WMT stock. Looking at data since January 2019, a position entered at the beginning of the week has roughly a 55% chance of rising by the end. Over four weeks, the long odds improve to around 61%, and over eight weeks, to over 69%.

That’s an excellent baseline: over two months, you can expect your long position in WMT stock to be profitable roughly seven times out of 10. But the catch is that the median return over these eight weeks — assuming a favorable scenario — isn’t that exciting at just under 5%.

What should be noted, though, is that extreme bouts of volatility in WMT stock are rare. Last week, WMT lost almost 10% of its equity value. Since January 2019, Walmart has only suffered a one-week equity loss between 5% and 10% six times. While this is a tiny dataset, investors buy the dips more often than not, which makes perfect sense—they’re already buying WMT anyway.

For an aggressive options strategy, traders may consider the 95/97 bull call spread for the options chain expiring March 7. This transaction involves buying the $95 call and simultaneously selling the $97 call, using the credit received from the short call to partially offset the debit paid for the long call.

Under similar volatile circumstances, statistical trends suggest that WMT stock could pop around 2.84% over the next two weeks. If so, that would be more than enough to trigger the aforementioned short call strike price of $97, thus qualifying for the maximum payout (minus any remaining time value of the options spread if exercising early).

Turning to Wall Street, WMT stock has attained a Strong Buy consensus rating based on 28 Buys, one Hold, and zero Sell ratings over the past three months. The average WMT price target is $112.33 per share, forecasting an almost 20% upside potential.

Walmart recently posted strong quarterly results, yet the market fixated on management’s cautious outlook, sending shares lower. Concerns about economic headwinds, shifting trade policies, and inflationary pressures weighed on sentiment despite the retailer’s proven resilience to similar challenges.

However, history suggests that Walmart’s stock tends to rebound from such dips, with statistical trends favoring a recovery. The retailer’s pricing power, supplier leverage, and critical role in the consumer economy provide a solid foundation. Given these factors, a near-term bounce appears likely, making the current weakness a buy-the-dip profit opportunity rather than an early warning sign of Walmart’s demise as the largest retail giant in the U.S.

Disclosure.