Shares of media giant The Walt Disney Company (DIS) have slid in recent months along with the overall market. One trader sees a further decline in shares in the coming weeks.
That’s based on the July 22 $100 puts. With 24 days until expiration, 5,040 contracts traded compared to a prior open interest of 129, for a 39-fold rise in volume on the trade. The buyer of the puts paid $4.80 to get into the trade.
Shares recently traded for about $98, meaning the put options are about $2.00 in-the-money. The stock has a 52-week low of $92.
The stock has shed 44 percent in the past year. Earnings have been knocked down by 48 percent in the past year, even with a 23 percent rise in revenue.
Action to take: Shares look like an attractive long-term buy in the low $90 range. Shares go for less than 20 times forward earnings at present. The stock doesn’t currently pay a dividend, but has in the past and could return down the future.
For traders, the options look interesting as a downside hedge in the past few weeks. If shares retest their 52-week low of $92, the options would be worth $8 at expiration. That opens up the possibility for high double-digit returns in the coming weeks. Traders should look to take profits on any strong down day for shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.