The story of The Walt Disney Company (NYSE:DIS) is nowhere near a fairy tale right now as the company continues to be in the red, and a closer look at the current options strategy too is uninspiring. As on Tuesday, the shares of the company traded 0.70% lower and closed at $86.15. CNBC‘s Dan Nathan at Fast Money gave details about the options action in the stock.
Nathan said that the options volume went excessively high in The Walt Disney Company (NYSE:DIS), which is four times the average daily volume, where most of the options traded were calls. But, Nathan shifted his focus mainly on one of the big trade, where a trader sold 50,000 of January 95-strike calls at a price of $1.44, when the current price of the stock is $86. Nathan added that since the shares of The Walt Disney Company (NYSE:DIS) has come off just a few percentage in the last few days, the trade might be perceived as a liquidation of profit, but in reality it is not. Nathan revealed that these 50,000 options were bought at the rate of $1.66 on June 4th and thus, the trader is bearing a loss of $1.1 million from this position.
Nathan said, “this just highlights, how difficult it is in a low volume environment to make money long premium directionally in options. You got to get a lot of things right, direction, magnitude and the move and timing.”
In addition to this, Nathan pointed out at the year-to-date chart of The Walt Disney Company (NYSE:DIS) illustrating that the stocks have been up by 12.5% and are inching closer to the breakout level. Nathan said if the shares are able to breakout the level, then it will be much like a lotto ticket, but finds it best to exit long positions at this point of time.