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Bullish Hedged Trade on Disney Looks Good Following Earnings

 May 08, 2008 06:22 PM UTC
Symbol Sentiment Start Return Closed
DIS Positive 05/08/08 +28.63% --

5/7 - "Walt Disney Co. (NYSE: DIS) shares are trading about $1 higher after the company reported a second-quarter profit of $1.13 billion or $0.58 per share, beating analysts' estimates of $0.51 per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on DIS."

"For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $30 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just two and a half months as long as DIS is above $30 at July expiration. Disney would have to fall by more than 14% before we would start to lose money."

"This trade could be risky if the slowing US economy starts to hurt DIS more, but even if that happens, that position could be protected by support the stock might find just at $30, where it bottomed out in the past month."


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5/8 - "(Disney's) theme park revenues and earnings for the quarter ended March 31, released on Tuesday, were impressive. Its revenues were up 11%, and operating income was up 33%. But, there are a couple of caveats. The press release noted: 'Higher attendance was primarily driven by the benefit of the shift of the Easter holiday. ' The other caveat was that the number of foreign visito...

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