Trade Alert - (DIS) September 30, 2021 - SELL-STOP LOSS

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.

 

Trade Alert - (DIS) – SELL-STOP LOSS

Sell the Walt Disney Corp (DIS) October 2021 $165-$175 in-the-money vertical BULL CALL spread at $6.16 or best

Closing Trade

9-30-2021

expiration date: October 15, 2021

Portfolio weighting: 10%

Number of Contracts = 11 contracts

We finally got snake bit this year by a Disney fourth quarter streaming downgrade. This is the only position I have left from the pre-correction period.

Delta is causing a slowdown in studio reopenings, leading to a coming content shortage. Covid also shut down the launch of the Indian Premier League streaming service. It was NOT what the market wanted to hear at an industry event, and the stock was trashed by $13.

I am sticking to my rigid STOP LOSS discipline of 2% of capital and the break of my upper strike price.

I am therefore selling the Walt Disney Corp (DIS) October 2021 $165-$175 in-the-money vertical BULL CALL spread at $6.16 or best

This is a classic example of where the stock should do well over the long term, but the front month options could expire worthless. In any case, this loss is more than offset by the many other financial positions we poured on at the recent market bottom.

Disney expects its streaming service to double from the current 116 million to 260 million by 2024, with much of the growth coming from international. This will be a big 2022 recovery play.

Disney is spending a staggering $31 billion on new content this year. The parks will soon be packed to the gills, as will the hotels. They already launched so many blockbuster movies that they have to be rationed awards at the Oscars. That leaves only the cruise line to make a comeback.

It really is a company that will soon be firing on all cylinders.

This is a bet that Walt Disney shares will not fall below the $175.00 strike price by the October 15 options expiration date in 24 days.

Here are the specific trades you need to exit this position:

Sell 11 October 2021 (DIS) $165 calls at………...........….………$8.40

Buy to cover short 11 October 2021 (DIS) $175 calls at……….$2.24

Net Proceeds:……………………..…….………..........………….….....$6.16

Loss: $8.80 - $6.16 = -$2.64

(11 X 100 X -$2.64) = -$2,904.

 

 

If you are uncertain about how to execute an options spread, please watch my training video by clicking here.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.

Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.