Executive Shake-Up Shocks Walt Disney Co (DIS) Options Traders

Walt Disney Co (NYSE:DIS) is trading lower after COO Thomas Staggs resigned, which is potentially bad news for call players

by Josh Selway

Published on Apr 5, 2016 at 10:28 AM
Updated on Jun 24, 2020 at 10:16 AM

Walt Disney Co (NYSE:DIS) is down 1.6% this morning at $97.07 -- battling with Cisco Systems, Inc. (NASDAQ:CSCO) as the worst performer on the Dow -- following the surprise resignation of the firm's chief operating officer (COO), Thomas Staggs. Staggs was widely considered the favorite to replace CEO Robert Iger when he retires. DIS is now down close to 8% year-to-date, but has found support today at its 40-day moving average. Still, options traders are likely disappointed with today's price action.

Specifically, nearly two DIS calls have been bought to open for every put during the past month at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In other words, speculators have been bullish on the stock in recent weeks -- a change from past behavior

It's more of the same today, with calls already trading at twice the intraday average. There appears to be early spread activity at the weekly 4/8 96.50- and 98.50-strike calls, and while it looks like a possible roll, it's unclear how exactly traders are positioning themselves here. 

There could be a connection between the recent burst of call buying and DIS' elevated short-interest levels, though. For instance, the stock's short-interest ratio stands at 7.20, meaning it would take well over a week for short sellers to cover their positions, at average daily volumes. So, these bears may be using call options to hedge against any upside

Analysts, meanwhile, are mostly split on Walt Disney Co (NYSE:DIS). Specifically, 12 brokerage firms recommend buying the stock, while 11 others say DIS is a "hold" or "strong sell." Meanwhile, the shares' consensus 12-month price target comes in at $108.93 -- a 12.2% premium to current levels. 

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