Mike Khouw's Walmart Options Trade

On CNBC's "Options Action", Mike Khouw spoke about Wal-Mart Stores Inc WMT ahead of earnings report, which is scheduled for Thursday.

He said the options market is implying a move of around 4 percent in either direction on the event and it normally trades around 2.3 percent. Khouw doesn't expect a big surprise on earnings and he thinks it would be a good idea to sell a near dated premium. He wants to sell the November 92.50 call for $1.10 and buy the January 92.50 call for $2.50. The total cost for the trade would be $1.40 and if the November call expires worthless, the January call would have to move above $93.90 at the January expiration, for the trade to make money.