Pixar (NASDAQ:PIXR) is a digital animation studio with the creative, technical and production capabilities to create computer-animated feature films and related products. The company has created and produced a number of full-length, computer-animated feature films, which were marketed and distributed by The Walt Disney Company. Pixar's animated feature films include Toy Story, A Bug's Life, Toy Story 2, Monsters, Inc., Finding Nemo and The Incredibles. In addition, the company markets and licenses its RenderMan software to other visual effects studios.
PIXR climbed to a new "all-time" high Friday as investors bought shares of the company in anticipation of the recently announced 2-for-1 stock split. The split is payable to Pixar shareholders of record on April 4, and trading in the split-adjusted shares will begin on April 19. Although the rally has pushed the stock into a slightly "overbought" condition, the bullish trend has been relatively steady for almost 9 months and there is no indication it will end in the near future. At the same time, there will likely be a brief, short-term consolidation in the issue and traders may be able to use that activity to improve the initial credit in the suggested spread.
Fundamentals Chart Earnings Dates Analyst Ratings
PLAY (conservative - bullish/credit spread):
BUY PUT MAY-85.00 PQJ-QQ OI=239 ASK=$0.65
SELL PUT MAY-90.00 PQJ-QR OI=253 BID=$1.20
INITIAL "NET-CREDIT" TARGET = $0.60-$0.75
POTENTIAL PROFIT (X 5 contracts) = $300
MARGIN REQUIREMENT (X 5 contracts) = $2200
RETURN ON INVESTMENT (max) = 14%
COST BASIS = $89.40
INITIAL EXIT STRATEGY:
Once the position is open, traders should place a (contingent) order to close the short ($90) put options if the stock moves below $91.75. Future adjustments to this loss-limit/exit point will be posted in the MCM Newsletter.