From Barron's The Striking Price (Oct. 10):
Catching Up to Wal-Mart
An options play to capture likely gains in the retailer's shares.
Wal-Mart Stores is a $249 billion tower of power in the stock market.
As investors worry about slowing global economic growth and weaker-than-expected corporate earnings, Wal-Mart's stock (ticker: WMT) is setting new highs; it hit $76.78 in intraday trading Wednesday.
Barron's anticipated this development, and told readers to buy shares prior to the recent conclusion of Wal-Mart's investor conference. We think Wal-Mart's rally is just getting started and expect the stock will remain in strong demand among investors hungry to own shares in a company that can increase revenue, and dividends. (See Streetwise, "October Surprise?," Oct. 6.)
Investors who didn't buy Wal-Mart early last week, and who now are uneasy about buying shares near an all-time high, can sell a put to position to buy the stock at a lower price.
With the stock at $75.61 late last week, investors can sell Wal-Mart's November $75 put for $1.25. If the stock declines below $75, investors must buy the stock. If the stock advances, the money for selling the put is kept....MORE