Unusual Options Activity: The Walt Disney Company (DIS)

The Walt Disney Company (DIS)

Trader bets on bounce in shares next month.

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  • Over 1,050 contracts traded on the March $136 call options on The Walt Disney Company (DIS). This is an eight-fold rise from the prior open interest of 135 contracts.

    The option, expiring in 22 days, is a play on shares moving $5 higher from around $130 right now. That’s about a 5 percent jump.

    Shares have sold off heavily recently as coronavirus fears are likely to impact tourism and travel, in turn lowering revenues at the company’s theme parks. And the company recently announced a new CEO.

    Shares of Disney are up 17 percent in the past year, putting returns just slightly ahead of the S&P 500 in the same timeframe.

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  • Action to take: We like shares here. They got a bit ahead of themselves with the Disney+ launch last year and are now at a more reasonable level. The media company’s strong brand can now be bought for just 21 times forward earnings.

    Regarding coronavirus fears, any drop in theme park attendance will simply occur later as fears die down. And right now, with more people opting to stay in, the company’s streaming platform continues to do better than expected on subscriber numbers. A rebound is very possible.

    Speculators can play this March trade, which trades for around $1.50. Depending on how quick and strong the rebound is, at $140, the option could move as high as $4.

    Investors should also consider starting a small stake in shares anywhere in the low $130 range.

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