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Trader looks to quintuple his money by betting on Disney

Ahead of Disney's quarterly earnings announcement early next month, one trader is making a trade he hopes will quintuple his money.

"With earnings coming up, I think Disney is headed for a move higher," Andrew Keene of AlphaShark said Wednesday on "Trading Nation."

Examining a daily chart of Disney, Keene points to a "clear bear channel to the downside," though with consolidation around the $90 level, which Keene deems a level of support.

And on a weekly chart, Keene points to a downtrend, and again sees a level of support at $90.


Keene calls Disney "over-sold," and sees shares of the media giant heading back to the $100 level the stock saw in July. Disney did trade up to $104 in May, but Keene doesn't see it going that high — he has his eyes on hitting $100 in January as his "measured move" target.

"We saw a lot of resistance at $100, but this is where I think it's headed in January," Keene said.

In order to capitalize on such a move, Keene buys the January 97.50-strike call and sells the January 100-strike call spread for a total cost of $0.50 per share, or $50 per options contract.

If Disney shares close at or above $100 on January 20, this spread will be worth $2.50 — five times his original investment. That would represent an 8 percent rally from Wednesday's opening price.

On the other hand, if Disney shares don't manage to rise, his trade will expire worthless.

"If it does sell off on earnings, I still think it can go higher," Keene said.

Trader takeaway: Andrew Keene is bullish on Disney ahead of earnings, and is buying the January 97.50/100 call spread in order to play for a rally up to $100.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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