Nov 5th - Opening Trade
We are opening a Low probability short term Bearish play on Disney.
We are risking $115 per contract to make $185 per contract. Read on…..
The Trade: We are opening the DIS $112/$109 Bear Put Spread
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Trade 1: Buy the $112Puts @ $2.55
Trade 2: Sell the $109 Puts @ $1.40
This can be placed as a combination trade at $1.15
Limit Price: $1.15
Max Profit: $1.85
Potential ROI: 161%
Current Share Price: $112.40
Expiry: Nov 6th
Breakeven: Above Below $110.85
Probability of Success: 42%
What do we want to happen: Share price of DIS to trade below $109 tomorrow.
Reason for trade:
1. This is a Low probability Trade so keep the position size small!
2. Disney is trading at a PE of 24….it normally trades at around 17. For a stock worth
$180 billion that’s high
3. In our view, alot of good news is already priced into the stock
4. Our Risk in this trade is limited to $115 per contract
5. Although this is a low probability trade at 42% the payoff is big… we are risking
$115 to make a profit of $185.
6. This would represent a 161% payoff.
7. Stock only has to fall 1.5% after earnings for us to start making a profit
8. Time Warner reported recently and warned that viewers are moving to Internet TV at
a faster rate than anticipated. Disney has a similar wing to their business which MAY
hurt earnings.
Note: If the share price goes up after earnings we will lose our investment of $1.15 per share.
Happy Trading
The team at Share Navigator