Options Check-Up: The Walt Disney Company, Best Buy, and Target

Analyzing recent option activity on DIS, BBY, and TGT


Published on Nov 7, 2014 at 7:42 AM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks attracting attention from options traders lately are blue chip The Walt Disney Company (NYSE:DIS), and retailers Best Buy Co Inc (NYSE:BBY) and Target Corporation (NYSE:TGT). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on DIS, BBY, and TGT.

  • Since dropping to $78.54 in mid-October, shares of DIS have rallied 17.1% to $92.00 -- an all-time high. Still, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), The Walt Disney Company's 10-day put/call volume ratio of 1.32 ranks higher than 99% of all other similar readings taken in the past year, meaning puts are being bought to open at a near-annual-high rate. However, given the equity's technical tenacity, these bets may have been initiated by shareholders looking for a hedge. The stock's Schaeffer's Volatility Index comes in at 21%, ranking in the 31st percentile of its annual range, suggesting near-term options are on the inexpensive side, from a volatility perspective.

  • BBY is down 11.7% on the year, but has been climbing steadily higher since its 28.6% gap lower in January. Since that time, the stock has added 31.2% -- including a gain of 1.7% yesterday, to finish at $35.21. Shares are nearing their consensus 12-month price target of $35.23, revealing there may be potential for price-target hikes to push them higher. On top of this, 10.2% of BBY's float is sold short, representing nearly five days' worth of pent-up buying power, at the stock's average daily trading volume. In other words, the stage may be set for a short-covering rally, on continued upside. Options traders are optimistic about the equity, with Best Buy Co Inc's 10-day ISE/CBOE/PHLX call/put volume ratio of 6.71 at an annual high -- though some of this may be the work of the aforementioned short sellers. Traders are currently paying above-average prices for BBY's near-term options, according to its SVI of 53%, which is in the 66th percentile of its annual range.

  • TGT added 1.3% yesterday, finishing at $61.89. Despite this, the shares are down 4.5% year-over-year. Target Corporation's long-term struggles aren't scaring away bullish options traders, though. The equity's 10-day ISE/CBOE/PHLX call/put volume ratio stands at 1.96, in the 71st percentile of its annual range. However, TGT's near-term options are expensive, on a volatility basis, as its SVI of 26% ranks in the 86th percentile of its 12-month range.

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