Walmart’s earnings have high bar to clear as search for safety pushes valuations into stratosphere
If recent history is any guide, Walmart’s Q4 earnings release Thursday before the bell will be appointment viewing.
This time last year, it wasn’t the DeepSeek freak-out or tariff chatter that caused the S&P 500 to definitively begin its downturn from all-time highs. It was Walmart’s underwhelming full-year guidance that catalyzed a momentum stock meltdown.
Since then, the retail behemoth has become a more important — and richly valued — part of the S&P 500, joining the trillion-dollar market cap club in the process. Investors have clamored for safety within the US stock market in 2026, and that’s meant bidding up the income streams associated with moving loads of volume at everyday low prices.
Jeff Jacobson, head of derivatives strategy at 22V Research, offers some perspective on just how well things have been going for the Bentonville-based giant:
Walmart versus the SPDR S&P 500 ETF is at its highest level since the aftermath of the global financial crisis;
The implied volatility of calls that offer exposure to additional upside in Walmart is very elevated relative to history (that is, they’re expensive);
This is the only time in the past five years where Walmart has traded above Wall Street’s 12-month price target.
That makes the bar to clear, regardless of how the actual numbers and guidance end up, fairly high.
In Jacobson’s view, it would be prudent for Walmart holders to try to take advantage of this elevated implied volatility by selling upside, or attempting to lock in gains after this hot run.
His recommendations:
Covered calls: sell April $145 calls at $3 or better.
Collar the position: sell WMT May $155 calls, buy May $125 put, sell May $110 put.
