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VT 
Walmart shares dropped by 2.3% after reporting earnings below expectations. The company announced an earnings per share (EPS) of $0.68, missing the estimated $0.74, though revenue surpassed expectations at $177.4 billion compared to the projected $176.2 billion.
Operating income decreased by $0.7 billion, or 8.2%, largely due to costs associated with legal and restructuring activities. Despite these challenges, Walmart has increased its forecast for the next fiscal year, anticipating revenue growth from 3.75% to 4.25% and projecting EPS to rise from $2.52 to $2.62.
The earnings announcement did not address tariffs. However, further information was expected from CEO Doug McMillon during a conference call scheduled for 1200 GMT.
The initial 2.3% pre-market dip on Walmart seems like a classic knee-jerk reaction to the headline earnings-per-share miss. However, we’re seeing strong top-line revenue and, more importantly, a raised outlook for the full year. This suggests the underlying business is healthier than the initial stock price movement implies.
The drop in operating income appears tied to one-off legal and restructuring charges, not a core business slowdown. This dip could be an opportunity for bull put spreads or buying calls, especially as recent government data has shown retail sales growing a modest but steady 0.4% last month. We saw a similar pattern in late 2023 when strong guidance eventually overshadowed a mixed report, leading to a rally in the following weeks.
Implied volatility is likely elevated right now, but the real test will be the upcoming conference call. With the CBOE Volatility Index (VIX) hovering around a relatively calm 16, buying straddles could be a smart play if we expect CEO Doug McMillon to announce something unexpected on supply chains or consumer habits. This strategy profits from a large price swing in either direction, which the current options pricing may not fully reflect.
For those who are more cautious, the EPS miss can’t be entirely ignored as it could signal pressure on margins. The latest consumer confidence index did show a slight dip to 101.5, suggesting households are still budget-conscious. Buying puts with a near-term expiration could serve as a cheap hedge against any negative surprises from the conference call.
