This could lead to a 299% gain. Check out how below.

I teach everyday people (like me) to trade options.  I do my best to write in an understandable way as if we are talking while sitting on my deck in a relaxed atmosphere.

The market was up 3 out of 4 days last week.  I am typing this on Wednesday, and you won’t get this until Friday. A lot could change in a couple days.   

Walmart Call Potential

For today’s Trade of the Day, we will be looking at Walmart (WMT).

Before analyzing WMT’s chart, let’s take a closer look at the company and its services.

Walmart Inc. engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam’s Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores; membership-only warehouse clubs; ecommerce websites, such as walmart.com, walmart.com.mx, walmart.ca, flipkart.com, and samsclub.com; and mobile commerce applications. The company offers grocery and consumables, which includes dairy, meat, bakery, deli, produce, dry, chilled or frozen packaged foods, alcoholic and nonalcoholic beverages, floral, snack foods, candy, other grocery items, health and beauty aids, paper goods, laundry and home care, baby care, pet supplies, and other consumable items; and health and wellness products covering pharmacy, over-the-counter drugs and other medical products, and optical and hearing services. It also provides gasoline stations and tobacco; home improvement, outdoor living, gardening, furniture, apparel, jewelry, tools and power equipment, housewares, toys, seasonal items, mattresses, and tire and battery centers; and consumer electronics and accessories, software, video games, office supplies, appliances, and third-party gift cards.

The chart of WMT below is a weekly chart with an ADX indicator at the bottom.  The description coming up next explains how to use the ADX.

Average Direction Index (ADX) – Strength Indicator

The Average Directional Index consists of 3 lines:  Green, Red and Black.

  • Green = +DI (Bullish)
  • Red = -DI (Bearish)
  • Black = ADX Strength Line

The DI line that is on top is in control.  If the ADX line is heading up, strength is supporting the DI line that is on top and in control.

Each candle on the chart represents price movement over a 5-day (week) period; therefore, it takes weeks for trades to play out.  When the -DI crosses over the +DI line, it gives a buy signal for Puts as the -DI line (red) appears as if it is in control and rising to head up on the ADX indicator, and as the ADX turns up that is even more bearish, suggesting a downward move is gaining strength.  When the +DI (green line) crosses the red and the black line points up it shows an upward trend and Calls can be considered.

Let’s look at WMT’s weekly chart.

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The ADX +DI (green line) is close to crossing the -DI and the black ADX line is curling up.  As long as the +DI is above the -DI, price should rise. The past few weeks have been positive. If you want to learn more about­­­­­ ADX, read on or, if not, scroll down to the alert.

Potential WMT Trade – Showing Strength

This signal could give a quick payout if it continues its downward move, and the strength of this pattern continues.  I am typing this on Wednesday, and WMT costs about $122.72.   If WMT ’s price moves below $122 and the – DI (red line) is above the +DI, and the black line is heading up, you could consider a Put trade.  The short-term price target for WMT is $115 and then, perhaps, lower.  With the swings in past months, I am suggesting small profit targets until a market trend starts again.

Check Out How an Option Trade Could Pay Out Big Time

Option trading offers the potential of a lower initial investment and higher percentage gain.   Let’s take a look and make a comparison.

If you bought 1 stock share of WMT, it would cost about $123. You would wait until the price hit a bottom before you bought stock.

If you bought 1 Put option covering 100 shares of WMT with a July 15th expiration date for the 115 strike, the premium would be approximately $ 1.17 today, or $117 for 1 option.  If price fell  $7 over the next few weeks, the premium would likely increase $3.50, giving $350 profit on your $117 investment. This is a 299% gain.  

Trading options is a win, win, win opportunity.   Options often offer a smaller overall investment, covering more shares of stock and potential for greater profits.

I like to stress when trading options, you don’t need to wait for the expiration date to close the trade. You can close anywhere along the way prior to the expiration date.  It is never a bad idea to take profit.

Trading options is like renting stocks for a fixed period of time. The potential to generate steady income with options is real, and it can be transforming.  

Routinely remind yourself – I believe in myself and my ability to succeed. I believe in an abundance of unlimited possibilities. The future will be awesome!

I wish you the very best,

Wendy

Past potential trade update:

Last week we discussed buying GILD calls. The stock price did not reach our target entry. No trade would be taken.