Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

A Short-Term Trading Opportunity in Disney Options?

|Includes: The Walt Disney Company (DIS)

For those traders who were long the 30-strike January 2010 call options (ticker DISAF.X) ahead of Walt Disney Co.'s (NYSE:  DIS) better-than-expected earnings that came out after the market closed last Thursday, congratulations.  You made some serious money.   

Now what?  Based on the post-earnings-announcement options activity on Friday, traders are now betting the other way.  Friday's increased volumes across almost all strikes suggests an attempt to capture the inflated premiums in DIS options that were created by Thursday's upside earnings surprise, on both the call and put side, particularly on the call side.  This could be a lucrative strategy for experienced options traders who expect the share price to pull back only slightly over the next two months and hover at about $30 per share. 

Put volume for the January 30 strike (DISMF.X) soared on Friday to more than ten times the daily average, and call volume for the January 30 strike (DISAF.X) rose to more than five times the daily average.  This may have served up a potentially good short straddle:  sell both a Jan 30 put for a hefty premium of $1.30 and a Jan 30 call for an even heftier premium of $1.50.  Receive combined premium income of $280 per pair and wait it out for two months.  If the stock closes at exactly 30 on Friday, January 15, 2010, less than two months from now, the options expire worthless and the short straddle strategy works to perfection.

Disclosure:  No options positions in DIS.  Long DIS common in daughter's account.