Stock Investment Through Put Selling Walmart Stock

Stock investment in Walmart stock may seem like a great idea during a market correction. After all analysts are busy pushing the stock as being correction safe and it is a huge corporation that continues to add increasing earnings each quarter. But is it a safe stock investment? Walmart Stock symbol is WMT and it trades on New York. For interested investors this Stock Investment link will take you to Walmart Stock Investor Relations.

Stock Investment In Walmart Stock

Walmart stock pays a 2.43% dividend (as of June 6 2012) with an annual payout of $1.59. This is a payout ratio of 31.8 times which is above the industry average but low enough to not be of concern. Debt to capital is 42.34% which again in very manageable. Market cap is 221.6 Billion and revenue is a staggering 455.8 billion making it the largest retailer in the world. Wal-Mart Stores has 2.2 million employees. Earnings to date are $4.66 per share and it has a book value of $20.86 per share. Cash flow is $7.25 per share. Walmart as a stock investment meets solid investment grade. Walmart Stock earnings per share is increasing above the industry average. The company continues to increase market share and continues to open new stores. As a stock investment goes, Walmart Stock seems like a safe bet and should provide excellent put selling opportunities.

Walmart Stock Recent Announcements

Recently Wal-Mart announced that customers can buy online and pick up at their closest store. They have also announced a new search engine for their online store which should assist Wal-Mart customers. This is a direct attack against which continues to make inroads into bricks and mortar stores like Wal-Mart.

While it is a good move on Wal-Mart’s part still rules for on-line purchasing. Their Amazon Prime which covers the cost of shipping via two day service anywhere in the USA is a move that more online retailers need to accept. Shipping is a ridiculous expense which Prime takes care of. To make it worthwhile for customers to pay the annual Prime fee, they provide movie access and a host of other perks. You can tell that chains like Wal-Mart have a long way to go to really understand and implement what online shoppers want. Personally I would not be intersted in ordering online and then driving, parking and standing in line at my local Wal-Mart to pick up something. Instead I love to buy it on-line and have it sent to my door. The time I am saving is incredible.

Nonetheless Walmart Stock is doing well and since May 16 when WMT Stock was trading at $59.19 it has largely ignored the recent correction and continues to set new 52 week highs. This is the type of movement I like to see in a stock investment. Strong support and failure to acknowledge overall stock market weakness. Put selling against a rising stock like Walmart Stock is not without its problems but it can be a very profitable stock investment either through put selling and covered calls.

Put Selling Walmart Stock

Recently I wrote an article about Put Selling A Rising Stock and right now Walmart Stock would fit perfectly in that stock investment strategy. The key to put selling a stock investment like WMT is bringing out the Bollinger Bands and MACD or Moving Average Convergence / Divergence. Just remember that like most stock investments, Walmart Stock has had run ups and run downs. In 2008 it twice set tops in the stock so an investor needs to remember that no matter how big or how strong the company, any stock investment can and will at times be volatile.

To cover off more about this stock investment strategy you might want to read the article on Early Warning Tools To Spot A Collapsing Stock, to refresh yourself on trading this strategy and how to determine when to get out of Walmart Stock when it pulls back.

The nice thing though about Walmart Stock is that it is a stronger stock investment since it has solid support levels at lower strikes. Therefore something dramatic would have to happen at Walmart in order for the Stock to break support levels. The chance of that happening is reasonably slim so this makes put selling easier through the Bollinger Bands and MACD.

With that in mind lets look at the Bollinger Banks

The Bollinger Bands on Walmart Stock

Remember my Bollinger Bands Settings, which are below.

Stock Investment Bollinger Bands Settings

Bollinger Bands Settings I Use To Follow A Stock Investment such as Walmart

Every time there has been weakness in Walmart Stock I have sold puts. In the chart below for the past 3 months I have marked the pertinent details. Before discussing them these are the details to look for in this stock investment:

Stock Investment Clues To Watch For

First when there was selling in April note how the lower Bollinger Band did not break. This is because there is good support around the $58 to $60 level in th Walmart stock. Therefore on weakness or a strong pullback even from today’s new 52 week high, there will be support in that range. This is great to know because when investing I like to know the potential downside in a short-term panic.

Next it is important that the stock is clinging to the Upper Bollinger Band. This is a bullish sign. As long as the stock clings to the Upper Bollinger Band my put selling trades can continue. This is very important for investors who follow a stock investment but have no intention or ever owning shares. By put selling only while the upper Bollinger Band is being hugged, it is difficult to get assigned shares when selling out of the money puts. Once the investment stock pulls away from the Upper Bollinger Band then it is time to watch the mid-way point of the Bollinger Bands. If the stock crossed down the mid-way point, it is time to buy to close naked puts and stop put selling until the uptrend resumes.

Stock Investment In Put Selling Walmart Stock – 3 Month Chart

Stock Investment Walmart Stock

Stock Investment in Walmart Stock Through Put Selling

Let’s discuss the items in detail:

1. On April 23 the stock took a tumble on the news out of Mexico. This is the first sign that I watch for and get ready for put selling.

2. The next day April 24 the stock tumbled to $57.65 before closing at $57.77. I sold 10 naked puts for the $60 put strike. If an investor interested in this stock investment, did not want to be assigned shares he would NEVER sell as the stock is moving along the lower Bollinger Band. I do not mind owning shares of Walmart stock and consider it a good stock investment. Therefore I sold puts here.

Remember how I indicated that there was solid support between $58 to $60 on Walmart Stock. I have confidence in my projection that the stock will return to $60.00 so why not take advantage of this when selling puts. This was the big volume down day. This will almost always be marked by a reversal the next day in a stock this big which is widely held by institutions.

3. The reversal day. The stock made a low of $57.18 and then pushed back to $58.43 right into the support zone before closing at $57.36. I bought 500 shares at $57.36 on April 25. The following day April 26 the stock had the big move back up on good volume and closed at $58.95. Again right in the support zone.

4. After a few days of investors deciding what to do next, I took advantage of some weakness on May 9 and sold puts at the $60 strike for June. Again the stock closed at $59.03 as it continued to stay in the support zone. You can see how reading charts in advance and being prepared for moves in specific stocks can be very profitable. I see no need to ever be in ETFs and Mutual Funds. Individual large cap stocks offer very good returns and are actually pretty easy to trade once you pick a handful you like, get to know them and follow them.

5. By May 23 my May puts all expired out of the money and the stock continued to cling to the upper Bollinger Band. I sold more puts into July at the $60 put strike. I am staying with the support zone still with my put strikes.

6. First down day in a while was on May 30. I sold my Walmart Share as the stock has pulled away from the Upper Bollinger Band and is trending sideways. I did not sell my stocks in the belief that it was going to fall, but I wanted to lock in my profit on this stock investment which would release my capital and allow me to use it for other trades or more put selling against Walmart Stock which is what I did. I sold the July $62.50 naked puts, my first move outside of the support zone of $58 – $60 in Walmart Stock. My 500 shares which I had bought for $57.36 I sold for $65.50. Return was $4070 or 7% for a few days work.

7. By June 5th Walmart stock was moving to the middle point between the Upper and Lower Bollinger Bands. It was either going to pull back or move higher. This inflection point is worth watching as it will determine whether to close my $62.50 naked puts for June and July depending on the move in the stock.

You can see in the days after point 7 in the chart that the stock stayed to the midway point and climbed. This is the sign to keep holding my naked puts on this rising stock. Once Walmart stock falls below the midway point then it is time to buy to close my naked puts and leave this stock investment behind unless the uptrend can resume.

Stock Investment – Put Selling Walmart Stock With MACD

Below are my MACD Settings.

Stock Investment MACD Settings

These are my MACD settings which I use with each stock investment

Let’s add MACD market timing tool to the above chart. By adding MACD you can spot the sell signals and the buy signals. Even today with the big move higher MACD shows positive divergence meaning that Walmart Stock should continue to move higher.

When MACD issued the sell signal I was selling puts. I did this because I am confident in the support levels for the stock. Those investors who never want the stock and are not interested in the stock would never put sell at this sell signal but wait for the buy signal before put selling.

Put Selling Walmart Stock with MACD

Put Selling Walmart Stock with MACD Market Timing Indicator Assists My Stock Investment

Investment Stock in Walmart Stock Put Selling Summary

You can see that put selling Walmart Stock is pretty straight forward. It is one of the easier stock investment trades available. If an investor never wants to own shares in this stock investment, it is a matter of waiting for the buy signal from MACD to begin put selling. Then it is a matter of watching the Upper Bollinger Band to be sure that Walmart stock stays in an uptrend. My next article on Walmart Stock will look at covered calls during the same period. That article will be posted shortly.

  • Marty

    I’m still trying to get a feel for how you classify your strategies Teddi. Is this one tailored specifically for Walmart or do you use it on other stocks too? Some of your strategies have different names and I am trying to learn how to associate the varying strategies with individual stocks. Thanks! – Marty

  • Hi Marty
    When it comes to stocks you cannot pick one strategy for each stock because stocks change over time. Sometimes they are in a range, other times in an uptrend, other times in a downtrend. So the strategy must change to meet the stock for that period. I had haoped through my site to get investors thinking about the stock, the trading pattern it is in and how to pick from the different strategies depending on the stock. I am hoping to keep writing about individual stocks through my heading Stock Investment, to show readers a strategy they perhaps had not considered. For example this morning I am working on a strangle on Facebook Stock. This is a strategy perhaps investors had not thought of.

  • Marty

    Teddi, this is very useful information. What time span are you basing the decision for rising, falling, or sideways action? Then I could see how one would rotate strategies. Also, is there a difference in your definition of lower support range and the lower trading range that you stretch back 5 and 10 years to see (and call the stock undervalued when it falls beneath)? Is the lower support range over a shorter time frame?
    – Marty

  • Hi Marty
    My time span for support at 58 to 60 is the past 6 months. Lower support at $58 is the same time frame, 6 months. I will have a look beyond that and write a quick note on support over the past few years for you.

  • Marty

    That would be wonderful Teddi. I do have difficulty gauging the trading range of stocks too when you are going back to the longer period of time. Perhaps a future article could focus on that with some examples.

    For the support levels, I am interpreting this article in that it has little bearing on whether you buy/sell options/stock, but it helps to determine how aggressive your stance is for the transaction. For example, if the stock in the support zone, you may sell CSPs ITM for much more premium as you are confident it will rise back up out of the support zone.

    – Marty

  • You are correct Marty. This article is designed to get investors thinking about stocks in a different way. For example I am being asked all the time now, “should I sell my Walmart Stock”. To answer this investors need to understand strategies that they can use. I will write about it tonight.