Booming Disney Stock Attracts Pre-Earnings Options Bulls

More than one million DIS calls have traded in the last two weeks

May 6, 2019 at 1:20 PM
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It's been a dramatic stretch for Walt Disney Co (NYSE:DIS) stock, per its 30-day historical volatility of 42%, which ranks in the 99th annual percentile. Most of this price action has been to the upside, with DIS shares carving out fresh highs on Disney+ streaming service details and a blowout "Avengers: Endgame" premier. Options traders have made a beeline to Disney, too, and most of the action has occurred on the call side.

In fact, the equity showed up on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest options volume during the past 10 days, with names highlighted in yellow new to the list. Per the chart below, 1.16 million DIS calls changed hands over the last two weeks, compared to 349,591 puts.

most active stock options may 6

Looking closer, it appears call buyers were especially busy over this two-week time frame. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), DIS' 10-day call/put volume ratio of 4.91 ranks in the 99th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

The May 150 call, in particular, has attracted significant attention during this period, with almost 22,700 contracts added. Data from the major options exchanges confirms notable buy-to-open activity here, indicating options traders are anticipating even more upside for the shares.

Speculators may be looking ahead to Disney's upcoming earnings report, slated for release after the market closes Wednesday, May 8. The stock has historically struggled in the session after earnings, though, closing lower in five of the last eight quarters. This time around, the options market is pricing in a 5.1% swing for Thursday's trading, regardless of direction, dwarfing the 1.5% next-day move DIS has averaged in the past two years.

Today, Disney stock is trading up 0.4% at $134.87, after Rosenblatt Securities boosted its price target to $175 from $150 following Friday's news the company sold its some of its sports networks assets to Sinclair Broadcast Group (SGBI) for $9.6 billion. The security has added 23.2% year-to-date, and a pullback from its April 29 record high of $142.37 has lost steam near $134 -- home to its mid-April highs.

disney stock chart on may 6


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