10/11/2020 Plan: We look at a put or put spread in Disney (Ticker: DIS)
10/11/2020 Plan (continued):
- DIS – Sell the October 23rd 120/116 put spread for 0.41.
- For those willing to hold DIS long term, sell the 119 put for 0.62
- Prices are as of market close 10/09/2020, actual fill and strikes may differ depending on Monday’s open, post will be updated accordingly.
- All trades are for educational purposes and do not constitute advice
10/11/2020 Commentary:
Since earnings in August, Disney has remained above 120. Implied Volatility is quite a bit higher than realized volatility and we look to sell options to take advantage of this. The short strikes selected are outside of expected move of DIS by the 23rd.
The return if the spread expires worthless is a bit more than 11% (41/359 = 11.4%).
The put sale is a bit more than 0.5% on total risk for a two week hold. One can also buy a far OTM put to reduce margin. For example, the 95 put could be purchased for about 0.04, bringing the total to 0.58 (at the midpoint). One then has a max risk of only $2342, vs $11838. This helps a lot if you don’t have portfolio margin or simply want to cap your risk. The return in this case would be about 2.5% if it expires worthless (58/2342 = 2.48%)
As another trade idea, I’m looking at the October 23rd 75/72 put spreads in AMD for 0.35.
Reach out with any questions on this or any other trade!
10/12/2020 Entry:
We sell the DIS Oct 23 120 Put for 0.59. Or as a spread, sell the 120/117 for 0.30. Had to go up a strike on the put as DIS rallied a bit. The spread is also narrower so you can do multiple depending on account size.
10/18/2020 Update:
A bit of a wild week for Disney as they announced they will be focusing more on streaming. This announcement caused the stock to go up significantly after hours on Monday and then it gave some of it back on Tuesday. Up on the week overall, helping our positions nicely. This was a short term trade and expires this week, so be sure to take action before the market closes on Friday. The put is worth about 0.18 and can be taken off for a nice $41 profit. I’ll be letting it decay a bit more before closing it. The put spreads are still worth about 0.12 and should decay pretty quickly if DIS doesn’t sell off.
10/25/2020 Close:
The put or put spread (depending on what you selected) expired worthless this week, giving us a win of $59 for the naked put or $30 for the each spread traded.
