Walt Disney Co (DIS) Spends Black Friday in the Red

Disappointing subscriber data from ESPN sends Walt Disney Co (DIS) lower

Nov 27, 2015 at 11:34 AM
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With the upcoming release of the highly anticipated "Star Wars: The Force Awakens" already breaking records, you would probably expect Walt Disney Co (NYSE:DIS) to be sitting pretty right about now. Today, however, the shares are off 4.1%, last seen trading at $113.86, and "Star Wars" is not to blame.

Today's slump comes on the news that subscribers to its giant sports network, ESPN, have fallen more than 3% in the past year, and have been in a downtrend since 2011. Just last month, DIS got a small boost when ESPN laid off about 300 employees. But many subscribers were less than thrilled when the company announced it was suspending its popular sports site, Grantland.

The fundamental picture seems rosier outside of the ESPN concerns. There is no doubt the company boasts plenty of merchandise to fill up shoppers' Black Friday lists, and the latest round of earnings beat expectations on the Street

The technical picture is also rosier, when viewed from a long-term perspective. Here at the beginning of the holiday season, DIS is up 21% on the charts year-to-date, and not far off an annual high of $122.08, tagged in early August. Still, sentiment is lukewarm toward DIS.

In fact, just 13 out of the 23 brokerages following the stock give it a "buy" or better endorsement. Plus, Disney's total float currently sold short would take more than a week to buy back, at the stock's typical pace of trading. And at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NADAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.88 ranks higher than 89% of comparable readings taken in the past year, implying option buyers are picking up puts over calls at an accelerated clip

Today, DIS puts are crossing at three times the normal intraday rate, according to data from Trade-Alert. It looks like one trader initiated a bear put spread in the weekly 12/4 series, buying to open 115-strike puts, and selling to open an equal amount of 110-strike puts. By initiating the spread, the trader is expecting DIS to extend its slump south of $115 next week, but the sale of the 110-strike puts reduces his maximum risk -- and, subsequently, his reward.


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