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Wal-Mart option traders are ‘overly complacent’ about earnings

Goldman Sachs is recommending investors buy short-term volatility in Wal-Mart Stores Inc.’s stock, because options traders appear to be overly carefree ahead of the discount retail giant’s earnings report.

An options strategy known as a “straddle” is pricing in a 3.0% move in the stock WMT, +0.01% , in either direction, after Wal-Mart reports its first-quarter results early Thursday. Goldman analyst Katherine Fogertey believes that expected move is too small, she said, considering the stock’s post-earnings trading history and the current retail environment.

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On the day of the past eight quarterly reports, Wal-Mart’s stock has moved with a range of plus or minus 2% to plus or minus 10%, Fogertey said, while the average move during that time was 4%, according to FactSet data.

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