0-Cost Options Strategy ahead of earnings
SOUND BUT UNEXCITING FUNDAMENTALS
Consensus is favorable on aggregate: Buy recommendation, +12.75% target upside.
Numbers are compelling (5-yr rev growth +6.63% and ROE +20.35%) but growth has been slipping, esp. in TV.
Valuation is un-demanding at a P/E of 17x (now less expensive than the market?)
TECHNICALLY ON A DOWNTREND BUT COULD BE REBOUNDING
DIS has been on a downtrend since the double-top of Aug/Nov 2015.
The long-term (M chart) is still clearly negative.
The medium-term (W) shows a series of negative cross-overs and a H&S formation.
But lately the stock has been rebounding with the market and the short-term picture (D) is turning positive.
A close above the 97.00 (MA200) would confirm the positive turnaround.
A close below 90.00 would confirm the negative trend and potentially take us towards the H&S target of 84.00.
EARNINGS AND GUIDANCE WILL BE A KEY CATALYST
What could propel the stock higher are the earnings and guidance from DIS.
STRATEGY: 0-COST EXPOSURE TO UPSIDE IN CASE OF BREAKOUT
Buy Nov 18 2016 $98 call to play the breakout = $0.34/share
Sell Nov 18 2016 $90 put to finance the synthetic long = $0.33/share
Best-case scenario: Stock breaks out ==> Make $ on the call or convert
Worst-case scenario: Stock tanks ==> Go long a quality long term holding close to the 52w low.
Consensus is favorable on aggregate: Buy recommendation, +12.75% target upside.
Numbers are compelling (5-yr rev growth +6.63% and ROE +20.35%) but growth has been slipping, esp. in TV.
Valuation is un-demanding at a P/E of 17x (now less expensive than the market?)
TECHNICALLY ON A DOWNTREND BUT COULD BE REBOUNDING
DIS has been on a downtrend since the double-top of Aug/Nov 2015.
The long-term (M chart) is still clearly negative.
The medium-term (W) shows a series of negative cross-overs and a H&S formation.
But lately the stock has been rebounding with the market and the short-term picture (D) is turning positive.
A close above the 97.00 (MA200) would confirm the positive turnaround.
A close below 90.00 would confirm the negative trend and potentially take us towards the H&S target of 84.00.
EARNINGS AND GUIDANCE WILL BE A KEY CATALYST
What could propel the stock higher are the earnings and guidance from DIS.
STRATEGY: 0-COST EXPOSURE TO UPSIDE IN CASE OF BREAKOUT
Buy Nov 18 2016 $98 call to play the breakout = $0.34/share
Sell Nov 18 2016 $90 put to finance the synthetic long = $0.33/share
Best-case scenario: Stock breaks out ==> Make $ on the call or convert
Worst-case scenario: Stock tanks ==> Go long a quality long term holding close to the 52w low.
Kommentar:
So the numbers are out and DIS disappoints again on the back of weak ESPN numbers. Expect the stock to trade slightly lower and to remain within our in-the-money band ($90-$98), in which case the best thing to do will be to do nothing. Let's see how this looks at the open.
Trade geschlossen: Ziel wurde erreicht:
Call option in the money. Unwind both legs of the options here and make an indicative $0.83/share.
