What if you could profit when the market gets overconfident?
Hello, everybody — JD here with your Rational Trader Market Analysis Daily.
In today’s video, I’m walking through a new mean reversion setup on the Walt Disney Company (DIS). It’s a simple, high-odds put credit spread you can use to collect cash as long as Disney doesn’t collapse by Friday.
Let’s get into it.
Why I’m Still Focused on Mean Reversion
If you’ve been following these videos, you know I’ve been running this “Mean Reversion Cash Machine” series all through earnings season — and even a bit before.
These setups are simple: we look for stocks that have made outsized moves, especially around earnings, then sell expensive short-term options as they fade back to the mean.
This week’s been no different.
Yesterday, I walked you through trades on CAT and MAR. Both fizzled out after earnings and barely moved. And with this kind of trade, that’s exactly what we want. In fact:
- Caterpillar: Call credit spread = ✔️
- Marriott: Put credit spread = ✔️
These weren’t home runs. They were clean, conservative cash-register trades — and DIS is setting up to be just like them.
But before I get to today’s trade, I’ve got a favor to ask you:
If you’ve been following along and you like these trades, I need you to head over to my free Telegram channel and give me a thumbs up on these videos.
Ok, now on to today’s trade.
What the Chart’s Telling Me
Last Friday, August 1st, during that market selloff, DIS dropped all the way down to two standard deviations below its mean.
That’s statistically significant — only about 5% of all price action happens outside that zone.
Since then, it bounced a bit on Monday, gave a little back today, but it’s still hanging near that lower bound.
And that’s where opportunity lives.
The Setup I’m Taking
I’m not betting on a big move. In fact, I’m betting on the lack of one. So here’s how I’m playing it:
- Sell the 112 put
- Buy the 107 put
- Both expiring this Friday
That’s a standard put credit spread — the kind I like to call a “cash machine” setup.
It pays as long as Disney stays above $112 through Friday. That’s a comfortable cushion — Disney would have to drop more than 8% in the next couple days for this to lose.
The net credit on the trade is about $0.75, which is a solid return (about 15% return on risk) for such a short time frame.
Why I’m Ignoring the Noise
I’m not worried about headlines or analyst reactions.
And I’m not out here predicting a rally. It’s about recognizing the math: stocks almost always revert to the mean. Options get mispriced. And if you know where to look, you can scoop up premium while everyone else is distracted.
That’s what the Mean Reversion Cash Machine is all about.
Don’t forget to head over to my free Telegram channel and give me a thumbs up or drop me a noteif you’re finding these trades useful.
I’ve got more setups coming — but only if I know you’re getting value from them.
See you tomorrow.
Talk soon,
JD
The Rational Trader
