In June, Wal-Mart Stores WMT – NYSE fell 5% on the news of Amazon.com AMZN – NASDAQ acquiring Whole Foods Market WFM – NASDAQ. This dip proved to be a lucrative buying opportunity for WMT, as the stock responded by bouncing 11.3% over the last month.
With WMT now at fresh 52-week highs, a sharp trader bought 3,000 WMT September 80 calls for $2.39 each earlier today.
Costing $717,000, WMT needs to increase just 1.0% to the break-even price of $82.39 for this trade to pay off. Since these options are already well in-the-money, only a miniscule move is necessary.
Above break-even, our customer stands to make $300,000 for every dollar WMT rises. On the flip side, should WMT close below the strike price of $80 (-2.0%) at expiration, all will be lost.
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