Call Traders Pile on Walt Disney Stock After Earnings

DIS hit a record high out of the gate this morning

Digital Content Manager
Feb 12, 2021 at 10:23 AM
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The shares of Walt Disney Co. (NYSE:DIS) are down 2.1% to trade at $186.89 this morning, after earlier hitting an all-time-high of $193.85 out of the gate. The negative price action came despite the entertainment conglomerate reporting better-than-expected first-quarter earnings of 32 cents per share -- much higher than the 41 cents per share losses Wall Street estimated.

Plus, its quarterly revenue drop was smaller than analysts anticipated, thanks to streaming service Disney+ adding 8 million subscribers over Christmas, which offset some of the impacts the coronavirus pandemic had on its theme park and movie studio businesses. The upbeat results have caught the attention of the brokerage bunch. The equity earned nine price-target hikes this morning, including one from Guggenheim to $225 from $200.

Digging deeper, Walt Disney stock has more than doubled off its March 18, seven-year low of $79.07. Bull gaps in November guided the shares along a channel of higher highs, while January pullbacks were met with support  from DIS' 60-day moving average. The equity has added 71.7% in the last nine months.

The options pits are firmly in the bullish camp. This is per the stock's 50-day call/put volume ratio of 3.20 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 91% of readings from the past year. This means calls are being picked up at a faster-than-usual pace. 

This earnings beat is only reinforcing investors' optimism. So far today, 85,000 calls have already crossed the tape, which is seven times what is typically seen at this point. Most popular is the expiring 2/12 200-strike call, while the standard expiration February 200 call is also seeing notable activity.

Walt Disney stock also looks to have been a good target for premium buyers in the past year, based on its Schaeffer's Volatility Scorecard (SVS) of 75 (out of 100). This means the shares have regularly made bigger moves than options traders were pricing in during the last 12 months.

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