Traders looking for magic in Walt Disney

By
A A A

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 long calls will appreciate and the short puts 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 Education section for more on why options are often better than common equity.

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.



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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: DIS

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

AustinOrgan_USETBASITE
AustinOrgan_USETBASITE              

Stocks

Referenced

91%

Most Active by Volume

19,702,846
  • $100.25 ▼ 1.36%
17,525,473
  • $42.10 ▼ 1.06%
13,801,153
  • $13.815 ▲ 30.45%
12,816,486
  • $16.793 ▲ 0.32%
11,469,177
  • $74.95 ▲ 0.50%
9,784,546
  • $17.4799 ▲ 5.68%
9,564,457
  • $3.5909 ▲ 0.16%
9,136,639
  • $16.32 ▼ 0.43%
As of 9/16/2014, 10:20 AM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com