Unusual Options Activity In Disney $DIS

| November 25, 2015 | 0 Comments

Star WarsUnusual Options Activity In Disney $DIS 

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week…

Disney $DIS is, of course, one of the largest and most popular entertainment companies in the world.  The company is worth over $200 billion and generates over $50 billion in sales each year.  For a good description of the company, follow the link.

$DIS is trading at $118.34, up 28% for the year.  That’s just 3% below the 52-week high and 35% above the 52-week low.

So what does unusual options activity in DIS tell us?

Omnipresent entertainment giant $DIS is having an excellent year after showing a strong recovery since September.  The stock has now significantly outperformed the overall market and has been one of the top DJIA members this year.

A big reason for Disney’s climb is the upcoming Star Wars movie being released in December.  The new movie has already set records for pre-sale tickets.  And, the associated merchandise if flying off the shelves.

Here’s the deal…

This week, a large amount of calls traded in DIS options.  Keep in mind, a call option makes money when the underlying stock goes up before its expiration date.  Conversely, selling a call option is beneficial when a stock goes lower or stays neutral.

To be more specific, a trader sold a block of 10,700 April 130 calls.  These calls were sold for $2.62, resulting in total collected premium of close to $2.8 million.  The volume far exceeds the open interest, so this is definitely opening action.

Here’s the chart of $DIS:

unusual option activity, a chart of DIS

As you can see, DIS has rocketed higher after dropping sharply during the August correction.  Basically, since the beginning of October, the stock has done nothing but gone up.  The price is now well over the 50-day moving average.

Despite the strong performance of late, the block of calls was sold at the $130 strike, although that’s still over $10 higher than the current price.  Even though April is still several months away, a Star Wars bump is already being priced in to some extent.

Moreover, these calls may be part of a covered call strategy, i.e. the calls were sold against a long stock position.  In that case, it’s still a bullish strategy that will make money up to $130.  In other words, $130 is far enough away that I would consider this a bullish signal on Disney, despite the potential ceiling.

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.