Option Trade 
Walt Disney Co (NYSE:DIS) Calls 
Wednesday, September 23, 2015

**OPTION TRADE: Buy the DIS Jan 2016 105.000 call (DIS160115C00105000) at approximately $4.40. Place a pre-determined sell at $9.00.

Note: No protective stop losses added as yet -- but if you wish to do so make it $1.75.

by Ian Harvey

September 23, 2015

Walt Disney Co (NYSE: DIS), together with its subsidiaries and affiliates is a diversified international family entertainment and media enterprise with five business segments: media networks, parks and resorts, studio entertainment, consumer products and interactive media, is poised to break through a resistance and sail past its 200-day moving average, according to Evercore ISI's Rich Ross.

Disney has had a big pullback after the last earnings report, and Rich Ross believes that the stock has big upside potential by the year end.

The stock formed a double bottom and it is now testing its 200-day moving average. Ross sees Disney eventually going to break above its 200-day moving average and by the year end it is going to fill the gap and reach $120, because there is not much resistance above 200-day moving average.

Disney's stock has been on sale since the company posted quarterly earnings results in early August -- shares quickly slumped by 20%, and they remain about 16% below their summer high.

This drop is a nice opportunity for an option call trade due to the discount prices. Disney's management also sees this as an opportunity -- in the weeks following the earnings report, executives spent over $2 billion on share repurchases.

Although the ad-based TV business is struggling, Disney's other operations are keeping the company in strong growth mode. The standout performer lately has been consumer products, which posted a 37% profit jump over the last three quarters.

Frozen- and Avengers-branded merchandise is flying off of store shelves, and Disney had already started to benefit from Star Wars product demand in June, even though retailers didn't start selling the items until September.

Thanks mainly to the consumer products division's 40% profit margin, which is the highest of Disney's five segments, the company's earnings are up 15% so far this fiscal year, to a record high $3.95 per share.

Other key drivers are:-

• The studio business should get a nice boost from Pixar's first movie release in two years (The Good Dinosaur is due in theaters in November).

• Meanwhile, the Star Wars licensing bonanza will lift consumer products sales this quarter, leading up to the The Force Awakens' global launch in December.

• And next year's movie calendar includes another installment from that blockbuster franchise in addition to entries from the Disney Animation, Marvel, and Disney Pictures studios.

• Of course, there's the core Disney brand, which the company employs not only through its namesake television channels, but also in its theme parks, consumer goods segment, and several movie studios.

• Finally, keep in mind that Disney also owns 100% of ABC Family, an 80% stake in ESPN, and half of A&E Television Networks.

Besides Evercore increasing ratings for Disney, equities researchers at Barclays boosted their price target on shares of Walt Disney from $94.00 to $100.00 recently. The firm currently has an “equal weight” rating on the entertainment giant’s stock.

There are 23 equities research analysts with a “Buy” or better rating on Disney. The company presently has an average rating of “Buy” and a consensus target price of $112.84.

Harvey’s Options Volatility Indicator


In the end, it's arguably impossible to find a company with as impressive -- and yes, powerful -- a brand portfolio as the entertainment juggernaut has built. In addition, Disney isn't afraid to shell out the cash required to bring other world-leading brands under its massive wing.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the DIS Jan 2016 105.000 call (DIS160115C00105000) at approximately $4.40. Place a pre-determined sell at $9.00.

Note: No protective stop losses added as yet -- but if you wish to do so make it $1.75.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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