Yesterday we previewed Disney’s FQ4 results that came last night, after the bell. Disney stock is higher today on those results. We detailed two bullish trade ideas in the stock, one near term, one longer term. Let’s check in on those trades so look at how they did and how they should be managed. The first was near term, targeting 100:
Short term:
DIS ($95.75) Buy the November 18th 96 / 100/ 104 call Butterfly for $1
- Buy 1 Nov 96 call for 1.45
- Sell 2 Nov 100 calls at 25 each or 50 cents total
- Buy 1 Nov 104 call for 5 cents
The stock got as high as 98.25 this morning but has now retreated a bit to 97. At 97, this trade is worth about 1.40. As far as trade management, this is the intrinsic break-even level (97) so I’d keep a tight leash below and take it off for a profit if the stock goes lower from here. If the stock holds on here and moves higher you can be patient as anything above 97 will be profitable with the max gain at 100 next Friday.
The second trade idea was looking out a few months:
Intermediate term:
DIS ($95.75) Buy the January 97.50 / 105 call spread for $1.60
- Buy 1 Jan 97.50 call for 1.90
- Sell 1 Jan 105 calls at 30 cents
With the stock 97, this trade is worth about $2 and in pretty good shape. You can think of this a bit like a stock alt that continues to have good risk reward on the upside. The risk of course, is if the stock went down from here. It’s currently about 35 deltas so that gives you a good sense of how much room you have on the downside before this is no longer profitable (about a dollar). It remains slightly out of the money or course, so sitting here below the break-even of 99.10 isn’t great for the trade. So that’s something to keep an eye on if the stock is unable to get above the 100 level. But it’s also a trade that doesn’t expire til January, so decay won’t be a huge issue for some time.