Diamond Member Pelican Press 0 Posted May 6, 2024 Diamond Member Share Posted May 6, 2024 A Disney earnings trade more likely to make money than just buying call options outright Several stocks reporting earnings this week imply some pretty big moves. We’ll take a deeper ***** into what options traders are ******** on in Disney and propose an alternative with a higher probability for a profit. Disney (DIS) traded above average call volume on Friday, with calls outpacing puts by nearly two-to-one. The options market is implying about a 6% move by the end of the week. While that is higher than the long-term average earnings-related move, Disney has been quite volatile in recent quarters. The stock jumped 11.5% following its first-quarter earnings release in February. Disney reports Tuesday before the bell. Current estimates call for a modest 1% revenue increase for the quarter. The company guided to between 5.5 and 6 million Disney+ subscriber gains. Streaming services have not yet reached profitability. As money manager Julie Biel commented on Fast Money on last Friday, while a lot of attention is directed at streaming, Disney’s “Experiences” segments, which includes its theme parks, resorts, vacations and merchandising, is a much larger contributor to revenues and profits than subscriber revenues. For full-year 2023 ended September 30, 2023 for example, Experiences revenues were $32.5 billion, versus $16.42 billion for all subscriber fees. DIS 1Y mountain Disney, 1-year Disney has rallied over 40% off the October 2023 lows, but trading just 24 times 2024 earnings estimates (Disney’s fiscal year ends in September) is reasonable if the Street estimates of 20% compound annual eps growth rates over the next couple years prove accurate. The most active contract expiring this coming Friday, May 10th were the $120 strike calls, 2,792 traded Friday at an average price of $1.33. Buyers of those calls are ******** Disney will rally at least 6.75% by the end of the week. Buyers are risking relatively little, but because the trade requires a big upside move by week’s end the options market is implying the probability that the trade is profitable is low at roughly 20%. Besides, as of Friday’s close, the May 10th weekly $120 calls were trading about 8% higher than Friday’s volume-weighted average price already. An investor who is willing to take more risk in exchange for a higher probability of profit might instead consider a diagonal call spread. The trade: For example one could purchase the June $115 calls for about $4.80 and sell the May 10th weekly $120 calls at $1.43 against them. The resulting $3.37 debit is a larger outlay, but the probability of profit is greater because the stock would not need to appreciate as significantly by this coming Friday to see profits as the chart below illustrates. The following stocks trade more than $75 million notionally in options on average each day, and options prices suggest they could see substantial moves by the end of the week. DISCLOSURES: (None) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer. This is the hidden content, please Sign In or Sign Up Breaking News: Markets,Markets,Personal finance,Walt Disney Co,business news #Disney #earnings #trade #money #buying #call #options #outright This is the hidden content, please Sign In or Sign Up 0 Quote Link to comment https://hopzone.eu/forums/topic/27360-a-disney-earnings-trade-more-likely-to-make-money-than-just-buying-call-options-outright/ Share on other sites More sharing options...
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