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Activist rumor spurs bullish Wal-Mart activity

It's the rumor that's moving the world's largest retailer.

Shares of Wal-Mart had been strong on Friday and Monday, buoyed by a rumor that activist investor Bill Ackman will take a stake in the mega-cap stock. There is no confirmation behind the trader talk, but it certainly seems to be a driver behind both the stock and Wal-Mart options.

Bill Ackman's firm, Pershing Square Capital, did not respond to a request for comment.

On Monday, as Wal-Mart shares rose to the highest level of 2014, Wal-Mart options were hopping, with four times the stock's average daily volume trading. Eighty-five percent of that volume was in the calls, rather than the puts, and in one of the biggest trades, a trader bought 29,000 January 82.50-strike calls for 64 cents per share.

This trade, which cost nearly $1.9 million in options premium, only pays off if Wal-Mart shares rise to a fresh all-time high within months.

Notably, the bullish bet also comes ahead of earnings, but expectations are low for Thursday's results given that Wal-Mart already reduced its sales growth forecast in October.

Wal-Mart
Getty Images

Because of the company's warning, "I do not think this is about earnings," Dan Nathan of RiskReversal.com said Monday on CNBC's "Fast Money." "This is rumors. This is about a large activist taking a stake: Bill Ackman."

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There has certainly been a trend of big investors making a play for larger and larger and larger companies, but Wal-Mart may be an especially tough nut for an activist investor to crack. The Walton family owns more than 50 percent of Wal-Mart shares, making serious shareholder dissent a virtual impossibility.

Read More Court ruling leaves door open for Ackman to vote at Allergan meeting

Still, Ackman has gone after big targets in the past. Nathan points out that Ackman recently sought to exact change in consumer products giant Procter & Gamble.

When it comes to Wal-Mart, rumors of an activist getting involved "absolutely contributed to the increased call activity," agreed David Seaburg, head of equity sales trading at Cowen & Co.

Of course, that doesn't mean that the call buyers will be rewarded. But given the low price of options, it might be worth taking a flyer.

"Although most of these speculative situations prove to be false, traders are willing to make a bet particularly in names where volatility is so cheap," Seaburg added.

Follow the show on Twitter: @CNBCOptions.

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    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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