Options Indicator Rises to Extreme Level Before Disney Earnings

Options traders are expecting a relatively large earnings swing from DIS

Josh Selway
Feb 4, 2019 at 11:00 AM
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Walt Disney Co (NYSE:DIS) is preparing to report earnings after the close tomorrow, Feb. 5, and there's notable options data to consider on the Dow component ahead of the event. DIS currently has a Schaeffer's put/call open interest ratio (SOIR) of 1.40, showing put open interest outweighs call open interest among contracts expiring within three months. More importantly, this reading ranks in the 100th annual percentile, showing that near-term traders haven't been this put-heavy in the past 52 weeks.

This type of extreme options reading can be used as a contrarian indicator favoring Disney bulls. That's especially true when you consider that there's been a large build during the past 10 days in put positions at the just-below 110 strike in the April series, and data confirms heavy buy-to-open activity here, suggesting this level could act as options-related support going forward.

Adding to this theory is the fact that the 200-day moving average sits right near this price point, as well. Plus, we've already seen the $110 level act supportive in recent months. The blue chip was last seen trading right at $111.

disney stock chart

Meanwhile, the options market is pricing in a 4.3% swing for Wednesday's trading, which is more than double the average post-earnings move of 1.8% from the past two years. Last quarter, the security moved up 1.7% the day after the report.

Wrapping up the options data on Disney, near-term options premiums aren't overly high, even with earnings around the corner, with the 30-day at-the-money implied volatility of 20.3% sitting in the middling 41st annual percentile. Echoing that, the stock's Schaeffer's Volatility Index (SVI) of 23% is in just the 26th percentile of its annual range, suggesting short-term options are attractively priced, from a historical volatility perspective.

 


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