Call Buyers Bear Down On Walt Disney Co (DIS)

Walt Disney Co (NYSE:DIS) is lower, following CEO Bob Iger's presentation at Goldman Sachs Communacopia Conference

by Karee Venema

Published on Sep 21, 2016 at 2:15 PM
Updated on Sep 21, 2016 at 3:00 PM

Shares of Walt Disney Co (NYSE:DIS) are down 1.2% at $91.83, after CEO Bob Iger took the podium at Goldman Sachs Communacopia Conference earlier. While Iger waxed optimistic about the entertainment issue's movie-making prowess, he noted that growth in DIS' ESPN division will likely expand at a slower rate than it has over the past decade. Additionally, Jefferies lowered its fourth-quarter cable advertising forecast for Disney, saying core trends have been running below estimates. Even with today's slip, calls crossing at two times their normal intraday pace on DIS stock, and buyers appear to be setting their sights on a big breakout.

By the numbers, around 30,000 calls and 23,000 puts have changed hands on DIS so far, two times what's typically seen at this point in the day. Most active by a mile is the stock's November 100 call, where 10,557 contracts have traded. It appears new positions are being purchased here -- with data from the International Securities Exchange (ISE) confirming at least some buy-to-open activity -- meaning traders expect DIS to topple the century mark by options expiration at the close on Friday, Nov. 18.

Widening the sentiment scope shows today's call-skewed session is just more of the same in DIS' options pits. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a top-heavy 10-day call/put volume ratio of 2.32 -- in the 95th percentile of its annual range. Simply stated, calls have been bought to open over puts at a near-annual-high clip of late.

Even more telling is the security's Schaeffer's put/call open interest ratio (SOIR) of 0.66, which rests lower than all other comparable readings taken in the past year. In other words, speculative players are more call-heavy now toward options expiring in three months or less than they've been at any other point over the last 12 months.

With low volatility expectations priced into the equity's near-term options, now appears to be an opportune time to purchase premium on DIS, too. In fact, not only does the stock's Schaeffer's Volatility Index (SVI) of 15% rank lower than 90% of all comparable readings taken in the past year, but its 30-day at-the-money implied volatility of 16% arrives in the low 15th annual percentile.

On the charts, DIS' fall from grace since hitting an annual high of $120.65 in late November has been swift, with the shares off 23.7%. What's more, the century mark has served as a stern layer of resistance for a number of Walt Disney Co (NYSE:DIS) rebound attempts this year. Regardless of where the stock settles at November options expiration, though, losses for today's call buyers are limited.

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