Some investors sold protection on Walt Disney yesterday, and
they'll feel the pain today.
optionMONSTER's tracking systems detected the sale of more than
11,000 May 42 puts yesterday for $0.22 to $0.28 against open
interest of just 3,732 contracts. At least 7,000 June 39s were also
sold, mostly for $0.17 to $0.19. Volume was more than triple open
interest in both strikes.
Overall option volume in the media giant was 11 times greater than
average. The mix of activity was bullish, with most puts sold and
the majority of calls purchased.
Traders will likely be taking losses on those bets when the market
opens today because DIS released weak fiscal second-quarter
earnings after the bell. Profit and revenue both missed forecasts
because of poor movie attendance.
That was a rude surprise following 1-1/2 years of strong reports,
and caused DIS to drop by about 3 percent in extended trading. The
shares had risen 1.88 percent to $43.91 in the normal session,
within a few cents of an all-time high, but fell 2.41 in
The put sellers will likely experience a quick hit to their
positions, but if DIS holds its ground until expiration their bets
will still pay off. They're essentially hoping that shares remain
above or close to the strike prices. Call buyers will experience
Despite the miss, the earnings report showed strength in television
advertising, which follows a trend also witnessed by Time Warner
and CBS. Theme-park attendance also rose.
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