Disney (DIS) Option Traders Optimistic Before Earnings

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Disney (DIS) Option Traders Optimistic Before Earnings

The Walt Disney Company (DIS) investors have maintained the share price range confined ahead of the company’s fiscal third quarter results report. At first look, it seems like option traders are poised for a bullish move, as the quantity of call options in open interest is increasing. If Disney reports a negative earnings surprise, the extraordinary option activity might trigger a severe downward trend in price movement.

A significant amount of call options are increasing in open interest for Disney, and option premiums are at an abnormally high level right now. Trading volumes suggest that traders have been buying calls and selling puts ahead of a positive earnings release. Unwinding these bets might put unexpected negative pressure on DIS’s share price.

It is tough to forecast which way a stock will move following results. A comparison of the stock’s price action and option activity, on the other hand, reveals that if DIS provides a poor report, the company’s share price might fall further, falling below its 20-day moving average following the announcement. This is feasible because options are priced anticipating an upward trend, but unexpected bad news might take traders off guard and cause a rapid drop in share price.

Key Takeaways

  • Ahead of the results report, traders and investors have kept the Disney share price range restricted.
  • The stock price just fell below its 20-day moving average.
  • The price of calls and puts predicts a greater move to the upside.
  • The volatility-based support and resistance levels enable a bigger upward rise.
  • This setup provides traders with the possibility to benefit from an unexpected earnings outcome.

A comparison of the intricacies of option behavior and stock price may provide useful information to chart watchers; nevertheless, it is critical to understand the context in which this price action occurred. The chart below displays the DIS share price movement as of Wednesday, August 11. This resulted in the setting for the earnings report.

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Current Trends

DIS stock has been increasing to the top third of the volatility range during the last month, before yo-yoing above and below the 20-day moving average. During this time period, the lowest DIS share price was approximately $169 in early July, and the highest share price was around $186 in mid-July. The stock closed in the center of the range shown by the technical studies on this chart.

The indicators used in the research are 20-day Keltner Channel indicators. These are price levels that are multiples of the stock’s Average True Range (ATR). This array highlights how the price has moved near but still fell short of the 20-day moving average in the week before results. This price movement in DIS shares suggests that investor confidence is dwindling as the earnings announcement approaches.


The Average True Range (ATR) has become a widely used technique for illustrating historical volatility over time. The average amount of time employed in its computation is 10 to 20 time periods, which comprises two to four weeks of everyday trading.

In this scenario, where the price trend for DIS has lately closed below its 20-day moving average, chartists may see that traders and investors are expressing apprehension about earnings. It’s worth noting that, in the week before results, Disney’s stock moved from considerably below the moving average to closing barely below it. As a result, chartists must decide if the change reflects investors’ expectations for positive profits or not.

Option trading information may give extra context to chart viewers, allowing them to make an opinion about investor expectations. Calls have recently outperformed puts by a significant margin. On Tuesday, approximately 48,000 calls were exchanged for every 29,000 puts. Typically, this volume suggests that traders are optimistic about the approaching news.

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The Keltner Channel indicator shows a series of semi-parallel lines based on a 20-day simple moving average, as well as an upper and lower line. Because the higher lines are produced by adding a multiple of ATR to the average price and the lower lines are drawn by subtracting a multiple of ATR from the average price, this channel indicator is an ideal visualization tool for displaying historical volatility.

Trading Activity

Option traders have priced their options to wager that DIS shares will close inside one of the two boxes illustrated in the chart between now and Aug. 20, the Friday after the earnings report is announced. The price offered by call option sellers is shown by the green-framed box. If prices rise, it suggests a 36% chance that DIS shares will finish inside this range by the conclusion of the week. The red box reflects the pricing for put options, with a 38% probability of being lower if prices fall after the announcement.

It’s worth noting that the open interest included roughly 565,000 calls vs nearly 506,000 puts, illustrating the bias that option purchasers had, as traders preferred calls over puts. It’s worth noting that call traffic outpaced put volume by more than 1.5-to-1 on Tuesday, which might further bias open interest data in favor of call options. Despite the large amount of puts in the open interest, implied volatility for these options has been declining, indicating that they are being sold rather than purchased.

A 10-day Keltner Channel analysis set at four times the ATR yielded the purple lines on the chart. This metric creates closely connected price action zones of strong support and resistance. These areas appear when the channel lines have made a noteworthy turn during the last three months.

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The levels marked by the turns are noted in the chart below. What stands out in this chart is how close the call and put prices are, with lots of opportunity to go either way, but somewhat more room to the upside. This shows that, despite recent call volume outweighing put volume, option purchasers are unsure about how the business will report. Although investors and option traders may not anticipate it, a surprise report might cause prices to surge or fall drastically.

These support and resistance levels demonstrate a wide variety of price support and resistance. As a consequence, any unexpectedly positive or unfavorable news might take investors off guard and result in an abnormally significant shift. Next the prior results report, DIS shares plummeted 2.6% the next day and continued to decrease the following week. Following this news, investors may anticipate a different kind of price movement. With so much opportunity for movement in the volatility range, share prices may increase or fall more than predicted.

Market Impact

Disney may not have the greatest market value, but it is clearly a bellwether stock. Nonetheless, their findings are unlikely to have a direct impact on index prices. Whatever the study says, it might affect equities in the entertainment business. A strong report might boost the stocks of other companies in the business, including Netflix, Inc. (NFLX), Comcast Corporation (CMCSA), and Roku, Inc. (ROKU).It might also have an impact on exchange traded funds (ETFs) like State Street’s S&P 500 ETF Trust (SPY) or Vanguard Communication Services ETF (VOX).

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