Unusual Options Activity: The Walt Disney Company (DIS)

Media giant The Walt Disney Company (DIS) has been declining this year, amid dropping theme park attendance and a strike impacting production in Hollywood. One trader sees a further decline in the weeks ahead.

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  • That’s based on the August $82 puts. With 21 days until expiration, 4,679 contracts traded compared to a prior open interest of 156, for a 30-fold rise in volume on the trade. The buyer of the puts paid $1.40 to make the bearish bet.

    Disney shares last went for about $86, so they would need to fall $4, or just under 5 percent, for the option to move in-the-money. It would also mean shares breaking under their 52-week low of $84.07.

    Such a move lower is possible given the short-term uncertainty that the company is facing right now. Plus, shares are somewhat overvalued, last going for about 38 times earnings.

    Action to take: Investors interested in buying Disney for the long haul can likely get a better price in the coming weeks.

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  • The best thing to do is be patient and wait for the Hollywood strikes to end and the theme park attendance numbers to perk up before buying in.

    For traders, the August puts have just a few weeks to play out, and are a big aggressive in terms of how much the stock could sink.

    But the company reports earnings on August 9, so it’s possible that the extent of any bad news could drive shares lower. At the very least, the options make for a reasonable hedge trade now.


    Disclosure: The author of this article has a position in the company mentioned here, but does not intend to further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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