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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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