Options Intelligence Report: The Walt Disney Co. (DIS), AK Steel Holding Corp. (AKS) & Macy's, Inc. (M)

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DIS ñ The Walt Disney Co.

Global entertainment giant, Walt Disney Co., was raised to ëbuyí from ëneutralí at Bank of America Merrill Lynch Global Research this morning on optimism surrounding the release of Alice in Wonderland and Toy Store 3. Disneyís share price rallied sharply at the start of the session to attain a new 52-week high of $32.86, though shares are up a lesser 3% to $32.60 as of 11:00 am (ET).

Bullish investors picked up roughly 3,200 calls at the March $33 strike for an average premium of $0.34 apiece, while the higher March $34 strike had 1,200 calls purchased at an average premium of $0.08 each. Optimism spread far-and-wide to the October $36 strike where 1,100 calls were coveted for $1.01 per contract. Long-term uber-bullish call buyers are perhaps expecting to profit should Disneyís shares surge at least 13.50% from the current price to surpass the breakeven point on the calls at $37.01 by expiration in October.

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AKS ñ AK Steel Holding Corp.

The rekindling of takeover speculation surrounding AK Steel this morning sent shares of the iron and steel manufacturer up 6% to a six-week high of $24.18. Unconfirmed takeover rumors inspired a rapid influx of bullish options traders to the near-term March contract in early trading and lifted options implied volatility on the stock 11.86% to 55.26%. Investors exchanged more than 9 call options on AK Steel for each single put option in play thus far in the trading day.

The March $24 strike attracted the most volume as more than 11,900 contracts changed hands in the first eighty minutes of the session. At least 6,600 in-the-money calls at that strike were purchased for an average premium of $0.92 apiece. Other investor picked up 3,200 calls at the higher March $25 strike for a volume-weighted average premium of $0.55 each. Finally, investors paid an average premium of $0.43 apiece to take ownership of 2,800 calls at the March $26 strike. Call-buyers are prepared to accrue profits should AKS shares continue to rally.


M ñ Macyís, Inc.

Shares of the department store operator are trading 0.60% higher to $20.15 after the firm said same-store sales ñ retail locations open for at least one year ñ rose 3.7% last month, which exceeded average analyst forecasts of 1.4% improvement. The positive news motivated one options investor to establish a long-term bullish trade in the August contract.

It looks like the trader initiated a short straddle by selling 1,400 calls at the August $22 strike for a premium of $1.23 apiece in combination with the sale of 1,400 in-the-money puts at the same strike for $2.87 each. The investor pockets a gross premium of $4.10 per contract, and keeps the full amount if Macyís shares rally 9.20% to a new 52-week high of $22.00 by expiration day in about six months.

As with all short straddles, the trader is hoping to see shares settle at the strike price, or the point at which both calls and puts expire worthless. The investor is exposed to losses if shares of the underlying stock trade above the upper breakeven point at $26.10, or if shares trade below the lower breakeven price of $17.90, at expiration.

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