Sellers are trying to knock Walt Disney lower today, but option
traders are bullish.
Our Heat Seeker monitoring program detected the purchase of about
5,600 January 50 calls for $1.69 and the sale of an equal number of
January 48 puts for $1.44. The trade cost $0.25, and is similar to
owning shares in the media giant.
If DIS rallies above $50, the
will appreciate and the
will become worthless, thus inflating the value of the overall
position. The opposite is true to the downside, and below $48 they
will be forced to buy shares.
The benefit of the strategy is that it controls the equivalent of
560,000 shares at a fraction of the cost. (See our
section for more on why options are often better than common
DIS is down 2.04 percent to $49.06 in afternoon trading. It rallied
more than 50 percent between the beginning of the year and
September, and has been pulling back since. Today's decline comes
after the company announced it would buy LucasFilm, the owner of
"Star Wars," for $4.05 billion in cash and stock. Quarterly
earnings will also be released on Nov. 8.
Overall option volume is quadruple the daily average so far today,
according to Heat Seeker.