• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock This Is Why You Shouldn’t Have Bought Disney (DIS) After Earnings
Stock

This Is Why You Shouldn’t Have Bought Disney (DIS) After Earnings

by February 12, 2023
by February 12, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

Monthly options expiration creates a whole new set of headaches for retail traders. As if trading wasn’t already hard enough, throw in the short-term financial incentive for market makers to “manipulate” prices and cash in big time at options expiration, and you have a recipe for significant volatility.

So, let’s combine options expiration and the Walt Disney (DIS) quarterly earnings report and I think you’ll understand where I’m coming from. Earnings blew away estimates, $0.99 vs. $0.69. Quarterly revenues also sailed past expectations, $23.51 billion vs. $23.34 billion. Not too surprisingly, DIS gapped higher and opened at 118.04 on Thursday morning, the day after it reported earnings. That was from its prior close of 111.78. DIS closed on Friday at 108.06, roughly 10 bucks beneath that Thursday morning open (see chart below).

I don’t know if DIS makes it all the way back to 100.73, but I do know that our directional clue is lower. Trading, to me, is all about managing risk. Traders MUST be aware that buying DIS at Thursday’s open would have been a HUGE mistake, whether DIS goes down or not. DIS could have continued climbing, but it wasn’t worth the risk!

When everyone buys after solid fundamental news, market makers provide the liquidity necessary on the short side, selling into that buying. I can guarantee you (and I don’t guarantee very much) that market makers will take advantage of retail traders to make inordinate amounts of money. That’s the way the system is set up, so we either use it to our advantage or lose our capital. It’s our choice. What most traders don’t realize, however, is that Disney’s “max pain” level for February is currently just above 100.00. So when DIS opened on Thursday morning at 118, there was roughly $134.7 million of net in-the-money call premium that market makers would owe at this Friday’s close (February 17, the third Friday of every month is options-expiration Friday for monthly options). However, by the close this past Friday, that liability had shrunk to $70.6 million. Market makers have saved $64 million in net options premium on DIS and, if prices actually drop to 100.73, the point of DIS max pain, that savings will grow another $18 million.

You absolutely must be aware of the monthly options impact on short-term price direction.

Monthly options expiration analysis is one part of our risk management strategies at EarningsBeats.com. Understand the system and improve your trading success. It’s important to be willing to continually learn about the stock market. We review max pain for all 30 Dow Jones stocks, all 100 NASDAQ 100 stocks, and all of our portfolio stocks. If you’d like directional clues for 142 stocks for next week, CLICK HERE!

Happy trading!

Tom

You Might Also Like
  • The SCTR Report: Insmed’s Stock Hangs in the Balance—Here’s What You Need to Know
  • Zweig Breadth Thrust Dominates the Headlines – But What about an Exit Strategy?
  • CPI, Bonds, Inflation, Indices and Gold
  • Performance Profile Paints Different Pictures for Commodity and Equity ETFs
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Pullbacks within Uptrends Create Opportunities
next post
The Big Wall Street Firms Use Manipulation Strategies To Fatten Their Wallets

You may also like

Does the MACD Histogram Hold the Secret to Anticipating Trend...

October 18, 2024

Lowering the Bar: Why Lowe’s Could Head South

January 24, 2025

Breakout Or Failed Breakout: It’s Important To See The Difference

January 9, 2024

Why NVDA’s Stock Price Shift Could Be Your Gain!

February 11, 2025

What the Federal Reserve Doesn’t Do, The Bond Market Does

October 5, 2023

Sector Spotlight: Sector Rotation Sends Mixed Signals

September 27, 2023

The Ord Oracle February 15, 2023

February 15, 2023

Downside Risk in a Bullish Market

March 19, 2024

Mish’s Daily: Sugar Futures and Social/Economic Impact to Stocks

January 18, 2023

Week Ahead: NIFTY Stares At Important Supports; Staying Above These...

March 11, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,630 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Regional Banks — From March 6th...

    March 10, 2023

    Sprouts Farmers Market: A Hidden Gem...

    January 4, 2024

    Post Tech Earnings & FOMC —...

    February 1, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here