By David Russell
Walt Disney (DIS) is pulling back today with the rest of the broader market, but the bulls are undeterred.
optionMONSTER's Heat Seeker tracking system detected the purchase of 15,300 January 50 calls for $1 and the sale of an equal number of January 35 puts for about $1.55. Volume was above open interest at both strikes.
The trade resulted in a credit of $0.55 and is similar to owning shares in the media giant. If it rallies, the calls will profit, while if it drops the short puts will generate losses. The main difference between the strategy and owning stock is that it will track DIS less closely as time passes and both contracts will expire worthless if shares are between $35 and $50 on expiration.
DIS is down 1.59 percent to $42.60 in midday trading but is up 14 percent so far this year. Most of the company's earnings reports have been strong, though recently its film division has been struggling--especially because of the flop of the movie "John Carter."
Shares are pushing against long-term resistance around $44, which has held the stock in check for more than a decade. If it breaks that level, some chart watchers may expect a prolonged rally.
Another interesting thing about today's trade is that implied volatility in the puts was 31 percent versus just 22 percent in the calls. That let the investor use the bearishness of others to finance an upside bet. (See related story on junk bonds)
Overall option volume in DIS is quadruple the daily average so far in the session, according to the Heat Seeker.