A trade idea in Discovery Communications

To get started, let’s look at a Daily chart of $DISCA:

DISCAPrice is currently in a battle with the flattening 50 SMA after building a base in the box over the past 3 months. There are several approaches to consider here and will depend on your time-frame and/or risk tolerance:

1) Sell the June 75/80 Strangle to collect $2 in premium. This gives you a range of $73-82 to work with until expiration (June 21).

2) Sell the July 75/80 Strangle to collect $3.40 in premium. This gives you a range of $71.60-83.40 to work with until July expiration (July 19).

3) Long stock here and sell the June 80 Straddle to collect $3.50 in premium. This gives you a range of $76.50-83.50 to work with until June expiration (June 21).

4) Long stock here and sell the July 80 Straddle to collect $5.10 in premium. This gives you a range of $74.90-85.10 to work with until July expiration (July 19).

5) Sell the June 75/80 Strangle & buy the July 75/80 Strangle for a $1.40 debit.

 

SMA = simple moving average

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