On CNBC's Options Action, Mike Khouw spoke about unusually high options volume in Walt Disney Co DIS ahead of earnings. The company is going to report earnings on Tuesday and the options market is implying the move of 3 percent. It usually moves 3.5 percent on average in a day after the event.
During the trading session on Monday, Khouw noticed a purchase of 5,000 contracts of the March 125 calls for $0.08. The trade breaks even at $125.08 or 14.16 percent higher from the current market price. Khouw explained that Disney is trading below its historical price to earnings multiple, so the trader is probably expecting a return to the historical multiple.
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