Trader bets $2 million on Wal-Mart rally

This year's rally in Wal-Mart is set to continue, according to one trader who bet nearly $2 million on the stock this week.

On Wednesday, a trader bought 20,000 September 72.50-strike calls for 89 cents, or $89 per options contract. Since each call option accounts for 100 shares of stock, this is a $1.78 million bet that Wal-Mart will rally at least 2 percent in the next few weeks.

The hefty trade came amidst an eventful day in the options pit for Wal-Mart, which saw 2.5 times the average daily call volume for its stock.

While Dan Nathan of RiskReversal.com is also bullish on Wal-Mart, he does see a potential trouble spot for the retail giant in the next few months. Last October, Wal-Mart's shares tanked following their annual analyst meeting where the company revealed that it expected profits to drop as much as 12 percent in the next year. This year's meeting will be held on October 6, and all eyes will be on Wal-Mart to see if this year will be a repeat.

But Nathan believes that traders can actually factor in the analyst meeting, and that the retailer is still a solid bet.

"[Wal-Mart is] up 18 percent, that's nearly double the performance of the XRT in 2016," he said Wednesday on CNBC's "Fast Money." "[If] you're looking for possibly some more volatility in the broad market, or potentially as you head into their analyst meeting, you may want to define your risk."

"I wouldn't be looking at September, I'd be looking out and I want to capture that analyst meeting and possibly their earnings that are going to happen in mid-November," Nathan added.

Wal-Mart is currently down about 2.5 percent this quarter to date.

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