Traders Watch Retail Earnings for Insight as Inflation Fears Grow

by | Nov 15, 2021 | Market Updates

This past week, officials at the Department of Labor confirmed what most of us have known for weeks… inflation is here!

The Nov. 10 Consumer Price Index report found the cost of goods jumped over 6% in October — the largest single-month move in 31 years.

This week, traders will watch earnings carefully as several major retailers report. We’ll also get a look at retail sales Tuesday followed by e-commerce sales on Thursday.

The reports will help us see where consumers are spending their money — and where they aren’t — as prices squeeze through the holidays.

The stakes here are big, as retail sales make up about 70% of U.S. GDP.

On top of that, it’s expiration week for November’s monthly options, which should add some extra volatility to those retail earnings options chains for Q3 2021.

How I’m Playing Q3 2021 Retail Earnings Options

We saw light volume to start the week. Trading in the S&P 500 was less than half its average daily volume Monday heading into the final hour of trading.

The markets are looking for any excuse to make big moves. Case in point: No. 2 discount retailer Target Inc. (NYSE: TGT) jumped $8 after Britney Spears was spotted at one…

So what’s going to happen when the red brand delivers its earnings before the bell on Wednesday? What about  other major Q3 2021 retail store earnings like Kohl’s Corp. (NYSE: KSS), Macy’s Inc. (NYSE: M) or Walmart Inc. (NYSE: WMT) and their options?

With the entire retail landscape bottled up by supply chain issues heading into the holidays, it makes sense that the environment should benefit companies with the resources to make alternate arrangements.

I don’t mind what we’re seeing in retail names from the Q3 2021 earnings options order flow like Walmart as it gets ready to report Tuesday morning… But in toppy markets like this, when premium and implied volatility are both running high, it makes more sense to look to sell premium on the big names as they report.

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WRITTEN BY<br>Lance Ippolito

WRITTEN BY
Lance Ippolito

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