The Walt Disney Company
) is following the broader market's path lower today, shedding
about 0.6% to trade at $66.60as of 1:44 p.m. EDT. Meanwhile,
pessimistic traders have converged on the blue-chip stock in the
options pits, as around 9,000 puts have crossed the tape so far --
more than double the norm.
Garnering notable attention is the October 65 strike, which has
seen over 3,800 contracts change hands at a volume-weighted average
price (VWAP) of $0.84. Since the bulk of the puts traded at the ask
price -- and implied volatility has ticked higher -- it's likely
that new long positions have been added here. Additionally, data
from the International Securities Exchange (ISE) confirms the
presence of buy-to-open activity.
In other words, traders will profit with each step DIS takes below
breakeven at $64.16 (strike price less the VWAP) by October
expiration. This would entail a 3.7% drop from the security's
current price. The delta for this put sits at negative 0.33,
implying it has a 1-in-3 chance of moving into the money ahead of
the close on October 18.
Should the entertainment giant remain north of the strike price
between now and then, the most today's put buyers risk losing is
the initial premium paid. Even more comforting, the stock's
Schaeffer's Volatility Index (SVI) of 18% ranks lower than 65% of
similar readings taken during the past 12 months, implying DIS'
near-term options are fairly inexpensive right now, historically
Today's decline aside, Walt Disney still sports a year-to-date
advance of roughly 34%, and has bested the broader
(INDEXSP:.INX) on a relative-strength basis during the most recent
two-month time frame. The shares gained 2.4% on September 12 alone,
after CEO Jay Rasulo said the firm will boost its share buybacks to
between $6 billion and $8 billion in 2014. However, it should be
noted that the stock's Relative Strength Index (RSI) of 75 is
docked in overbought territory, suggesting a continued pullback
could be on the short-term horizon for DIS.
This article by
was originally published on
Schaeffer's Investment Research
Below, find some more great content from Schaeffer's Investment
Study of the Week: A September to Remember?
Chart of the Day: SolarCity Corporation (
Trading 101: A Look at FedEx Ahead of