Walt Disney is pulling back today with the rest of the broader
market, but the bulls are undeterred.
optionMONSTER's Heat Seeker tracking system detected the purchase
of 15,300 January 50 calls for $1 and the sale of an equal number
of January 35 puts for about $1.55. Volume was above open interest
at both strikes.
The trade resulted in a credit of $0.55 and is similar to owning
shares in the media giant. If it rallies, the calls will profit,
while if it drops the short puts will generate losses. The main
difference between the strategy and owning stock is that it will
track DIS less closely as time passes and both contracts will
expire worthless if shares are between $35 and $50 on expiration.
DIS is down 1.59 percent to $42.60 in midday trading but is up 14
percent so far this year. Most of the company's earnings reports
have been strong, though recently its film division has been
struggling--especially because of the flop of the movie "John
Shares are pushing against long-term resistance around $44, which
has held the stock in check for more than a decade. If it breaks
that level, some chart watchers may expect a prolonged rally.
Another interesting thing about today's trade is that implied
volatility in the puts was 31 percent versus just 22 percent in the
calls. That let the investor use the bearishness of others to
finance an upside bet. (See
on junk bonds)
Overall option volume in DIS is quadruple the daily average so far
in the session, according to the Heat Seeker.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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