Options Traders Flock to DIS Following Upbeat Q4 Report

The options pits are in a frenzy at the moment

Assistant Editor
Nov 13, 2020 at 10:25 AM
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The shares of Walt Disney Co (NYSE:DIS) are trading up 1.8% at $138, after the company reported narrower-than-expected fiscal fourth-quarter losses per share. Revenue also beat analysts' forecasts, as theme parks began to show hints of recovery following shutdowns, alongside increasing Disney+ subscriptions. Additionally, Disney announced it would forego its January dividend payment, though it plans to reinstate it in the future.

In response, DIS has received no fewer than seven price-target hikes, as well as an upgrade to "outperform" from "sector perform" from RBC, who upped its price target to $170 from $124. The flurry of bull notes is unsurprising, considering coming into today, six of the 18 in coverage sported a "hold" or worse rating. Plus, the equity's 12-month consensus price target of $146 is an 8% premium to last night's close.

Disney stock's Nov. 9 bull gap sent the equity above $134 for the first time since Sept. 10. Since then, however, the equity has closed the last four sessions lower, though today it's poised to buck that trend. Longer term, DIS has added 27.3% in the last six months.

As a result of today's news, there's a frenzy in the options pits. In the first hour of trading alone, over 63,000 options have crossed the tape so far -- six times the intraday average and volume pacing in the 99th percentile of annual readings. The most popular by far is the December 150 call, followed by the November 140 call. 

With earnings in the rearview, weighing in on Disney stock with options could be a prudent play. The stock's Schaeffer's Volatility Index (SVI) of 47% stands higher than just 26% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

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