Carter Worth And Mike Khouw's Disney Trade

On CNBC's Options Action, Carter Worth analyzed Walt Disney Co DIS from a technical standpoint. He said that bearish and bullish forces are now in equilibrium within the stock, and its price action forms a technical pattern called the wedge. He believes the stock could make a sharp move in either direction after the earnings report, but he would bet that it is going to trade higher. Worth thinks that the best idea would be to use options to trade Disney.

Related Link: Walt Disney, Alibaba On Deck For Earnings Announcements

Mike Khouw suggested that traders should buy a straddle in this situation. He would buy the August 95.50 call for $1.60 and the August 95.50 put for $1.95. The trade would cost him $3.55 and he would make money if the stock trades above $99.05 or below $91.95 at the August expiration. The premium paid is 3.7 percent of the current stock price and the stock has to move more than that for Khouw to make money with the straddle.

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