Disney (DIS) reports fiscal Q3 results tomorrow after the close. The options market is implying about a 3% one day move, which is a tad rich to the 4 qtr average of about 2.5%. Looking at the last 4 post earnings moves, -20 bps, + 7.6%, -2.17% and -18 bps it’s clear that the stock usually doesn’t move a ton post earnings.
The stock made a new 52 week high this morning before reversing with the broad market. The ytd chart is fascinating, up 28% in 2015, and up 10% since breaking out to new highs in late June:
The red circle from early May marks the opening the day after their Q2 results when the stock opened at a new high, but immediately caught sellers, before finding some footing and consolidating in and around $110 before the June breakout.
With the new highs today came a flurry of options activity, with total options volume more than 5x average daily with call and put activity fairly even.
The largest trade of the day came shortly after the open. When the stock was $121, a trader bought to open 8300 Aug 115 puts for .68 to open. These puts represent $565,000 in premium and break-even down at $114.32, down 5.5% from current levels on Aug expiration.
The options market places less than a 20% chance that these puts will be in the money on Aug expiration, but options prices appear cheap, with 30 day at the money implied vol well below levels of its last couple earnings reports:
And here is another thing for you, the stock is trading at about 24x this year’s expected earnings, at a more than 10 year high:
So the stock’s fab performance, cheap options prices and historically high valuation are causing some investors to either buy cheap disaster protection or speculate on a greater than expected move to the downside following tomorrow’s earnings.
We will follow up tomorrow with a more detailed preview, but wanted to highlight today’s options activity.