An Option Trade to Profit from Wal-Mart

How would you like to profit from Wal-Mart instead of having them profit from you. That would be different, in my case anyway. My wife and I spend plenty there.

So here’s an option play that’s designed to get some of your hard earned money back. Just like any other trade that is suggested, make sure you do your due diligence before investing your own money.

It seems like a person going to Wal-Mart (WMT) these days is taking a risk of exposure to some type of criminal or otherwise negative behavior. A search of Google News yielded a theft, indecent exposure, picketing and a shooting associated with a Wal-Mart stores, all on the first page of the search results. Maybe it has to do with Wal-Mart’s targeted market segment.

Wal-Mart’s stock price has been on the rise for the last five months, as shown below:

Wal-Mart’s rising stock price indicates that investors think the company’s prospects are improving, but investors may be a little disappointed in Wal-Mart’s upcoming earnings release on Tuesday, February 21, 2012. Two issues potentially getting in the way of Wal-Mart celebrating are Europe and gasoline prices.

With a significant portion of Wal-Mart’s revenue attributed to Europe, and with the recent volatility associated with European sovereign debt, Wal-Mart’s European results may not be so stellar. Additionally, the amount of money that Wal-Mart shoppers spend is inversely correlated with the price of gasoline. As the price of gasoline increases, Wal-Mart’s shoppers have less to spend at Wal-Mart and vice-versa. And, as the price of gasoline has increased over the timeframe of the results that will be reported, Wal-Mart shoppers probably spent less as a result.

In its most recent Q3 2012 earnings call, the company indicated it is executing well on its plan to broaden assortment, improve merchandising and reaffirm price leadership. Additionally, the company…

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