Disney Stock Lower Despite Earnings Beat

DIS' recent options traders may be kicking rocks today

by Emma Duncan

Published on May 9, 2018 at 10:14 AM
Updated on Jun 24, 2020 at 10:16 AM

Shares of entertainment mogul Walt Disney Co (NYSE:DIS) are trading lower this morning, despite the company's fiscal second-quarter earnings beat. The firm said higher theme-park revenue and the success of "Black Panther" helped offset weakness in the TV division, and CEO Bog Iger teased the possibility of more "Avengers" movies. Iger also expressed confidence that Disney's deal to buy Twenty-First Century Fox (NASDAQ:FOXA) assets will go through, despite recent buzz of a bidding war with Comcast Corporation (NASDAQ:CMSCA). DIS stock was last seen down 2.2% at $99.51.

RBC analysts said Disney stock is "attractive with or without FOXA," while Cowen said it was a "nice quarter" for the blue chip. Meanwhile, DIS was hit with a price-target cut to $134 from $138 by Moffett Nathanson.

Shares of Disney have been stair-stepping lower since their early January peak, and are now set to close back below their 50-day moving average. However, pullbacks in 2018 have been supported by the $98 region.

Despite its recent price action, options traders were leaning bullishly toward the Dow name ahead of earnings. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day call/put volume ratio of 2.33, ranking in the 86th annual percentile. This suggests calls have been purchased over puts at a much faster-than-usual clip during the past two weeks.

Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.70 ranks in the 21st percentile of its annual range. This low ratio suggests that speculative players have rarely been more heavily skewed toward calls over puts, looking at options that expire in the next three months.

Short interest on DIS rose more than 13% during the past two reporting periods. At Disney stock's average daily trading volume, it would take nearly a week for the shorts to cover their bearish bets. It's possible that some of the recent call buying, particularly at out-of-the-money strikes, could be attributable to short sellers seeking options hedges.


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