'Star Wars,' Alibaba Deal Put Walt Disney Co (DIS) Bears On Notice

Walt Disney Co (DIS) is breaking out amid glowing reviews of "Star Wars: The Force Awakens"

by Alex Eppstein

Published on Dec 15, 2015 at 10:29 AM
Updated on Jun 24, 2020 at 10:16 AM

Walt Disney Co (NYSE:DIS) has started the day on the right foot, after the blue chip reached a licensing agreement with Alibaba Group Holding Ltd (NYSE:BABA) to increase sales of movie-related products in China. Adding to the buzz, "Star Wars: The Force Awakens" debuted to rave reviews last night in Hollywood, with the national release set for this Friday. All things considered, DIS is sitting 2.6% higher this morning at $112.16.

In the options pits, calls are currently flying off the shelves at twice the average intraday rate -- and almost three times the number of puts on the tape. The intraday put/call volume ratio of 0.36 stands higher than just 13% of all other readings from the past year. This is pretty unusual, considering the stock's Schaeffer's put/call open interest ratio (SOIR) checks in at 1.22 -- meaning puts outnumber calls among options set to expire in the next three months. In fact, this SOIR ranks in the put-skewed 87th percentile of its annual range.

Along similar lines, DIS' 50-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 0.78 -- outstripping two-thirds of all other readings from the past year. In other words, traders have been buying to open puts over calls at a faster-than-usual clip in recent months.

Option traders aren't the only ones skeptical of DIS. The stock's short-interest ratio registers at 6.60, meaning it would take close to seven sessions for short sellers to buy back their bearish positions, given average trading volumes.

On the charts, Walt Disney Co (NYSE:DIS) has done little to merit such high levels of doubt. Year-to-date, the shares have advanced a market-beating 19%, and this morning they gapped above their 10-day moving average -- setting them up for their first close above this trendline since Nov. 25. Should DIS sustain this momentum, an unwinding of skepticism could fuel future gains.

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