The Walt Disney Co. (DIS)

Update 2/24/2022: I exited my short bull put vertical options spread on DIS, 22 days before expiration, for a $1.14 debit per contract/share, a profit before fees of $46.00 per contract. Shares were trading at $142.42, down $2.32 from the entry level.

The Implied Volatility Rank at exit was 57.6%, down 17.6 points from the entry level.

I exited at 29.4% of maximum potential profit, 4.4 points above 25% of the maximum, my normal exit point for earnings plays.

Shares declined by 1.6% over 15 days for a -39% annual rate. The options position produced a 40.4% return for a +982% annual rate.

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I have entered a short bear call options spread on DIS, using options that trade for the last time 37 days hence, on March 18. The premium is a $1.60 credit per contract share and the stock at the time of entry was priced at $144.74.

The Implied Volatility Ratio stood at 75.2%.

Premium:	$1.60	Expire OTM
DIS-bear call spread	Strike	Odds	Delta
Calls
Long	155.00	75.0%	30
Break-even	151.60	70.0%	35
Short	150.00	65.0%	40

The premium is 64% of the width of the position’s short/long spread. The profit zone covers a 4.7% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 2.1:1, with maximum risk of $340 and maximum reward of $160 per contract.

How I chose the trade. The trade was placed to coincide with DIS’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincide with the expected move of $8.88 either way, based on options pricing, which gives a price range of $133.14 to $150.90.

By Tim Bovee, Portland, Oregon, February 9, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.