Well, RTH has outperformed other retail indices— it's down just 23% for the year. However, the S&P Retail SPDR is down 47%.

Further, WMT makes up only 2.06% of XRT. I think there's a connection here, and we can call this the "Wal-Mart effect."  Given the Wal-Mart effect, it makes sense that RTH will outperform XRT — that's not what you want if you're playing puts on retail. 

The S&P Retail SPDR has severely underperformed RTH for the past year and it has liquid options. It's our ETF of choice to take advantage of retailers' collective misery.

Don't Hit the "Wal" Shorting Retailers

And, speaking of Wal-Mart, it's likely to be the only retailer to come out ahead this shopping season, so we suggest staying away from the short side of WMT.

In addition to its bargains, which should propel sales, the stock has technical support at the key $50 level, which supported the shares a number of times throughout the chaotic month of October.

And for those keeping score, the $50 mark is the site of the still ascending 100-week moving average. It's also the site of peak put open interest in the December series.

So, there's reason to believe that the stock has already to put in a bottom near the current price. XRT, on the other hand, has no such support on the horizon.

But, there should be a lot of other opportunities to play retail's decline…