Shares of entertainment giant The Walt Disney Company (DIS) have been sliding in recent months. One trader sees a further decline in the days ahead.
That’s based on the May 20th $108 puts. With 14 days until expiration, 5,340 contracts traded compared to a prior open interest 156, for a 34-fold increase in volume on the trade. The buyer of the puts paid $1.71 to bet on a further decline in shares.
Shares last traded around $116, so they would need to decline about 7 percent for the option to close in-the-money.
The stock has been hit hard as streaming subscriptions have slowed across the industry in recent quarters. Plus, the company is set to lose some unique governance conditions that it had in the state of Florida. Shares are already down 37 percent over the past year.
Action to take: Shares are likely to continue their current downtrend, even over a period as short as the next few weeks. The stock doesn’t currently pay a dividend, so there’s no rush to get into shares of this entertainment giant until a more sustainable market rally is underway. That said, investors might want to go long on shares at a price of around $100 or under.
For traders, these puts have a short amount of time before expiration. Look for a quick mid-double-digit gain at best, and look to close out the trade early. In a volatile market, shares can trend down, but could also have some strong rallies in the coming days.
Disclosure: The author of this article has no position in the company mentioned here, and does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.