Disney Options (DIS): Unusual Trading Activity
Options in “the mouse house” Disney (DIS) are experiencing a large amount of trading activity today.
Disney is an interesting company right now.
Not only are Disney’s earnings scheduled to be announced tomorrow after the close, but also its long anticipated movie, “The Avengers” came out this weekend.
“The Avengers” brought in $200 million at the box office over the weekend, well above expectations.
So, between these two big data points, what are option traders doing today?
Simple… most traders are selling covered calls against their stock positions.
It’s important to note that historically Disney’s stock moves about 3.5% either way on earnings.
With the market at a key juncture, option traders are looking at higher than normal volatility and selling Disney calls.
Remember, selling calls against a stock is a covered call strategy.
This morning most of the option activity is centered around the DIS October $46 strike calls and the DIS January $46 strike calls.
The October $46 call options are selling for a price of $1.57 a share. This is a 3.5% premium on the current stock price.
The January $46 call options are selling for a price of $2.25 per share. This represents a 4.8% premium of Disney’s stock price.
And with long term support at $42 a share, selling either one of these strikes is a great trade.
Now, what else is driving this option action?
As you know, Disney owns the rights to some of the most famous characters ever created, including Mickey Mouse and Winnie the Pooh.
These characters and others are featured in several theme parks Disney owns or licenses around the world. The company owns ABC, The Disney Channel, ESPN, and a 42% stake in the A&E channel.
And, although making movies is a hit-or-miss business, Disney’s large library of animated content with popular brands and characters greatly reduces the stocks volatility.
Bottom line… Disney is a well diversified, low risk stock that I wouldn’t mind owning.
And you shouldn’t either.
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Category: Unusual Options Trading Activity
