Disney Call Options are Frozen in Bull Territory, Buy DIS Calls Now

About one month ago, I explored the possibilities in the options of Walt Disney Co (NYSE:DIS) in a post titled, “Let’s Start Christmas Options Trade with DIS Calls”. In that post, I talked about how analysts at UBS gave the stock a “Buy” rating with a $106 price target. I explored the fundamental reasons that supports the bullish thesis on the stock and I recommended that you buy the DIS Feb 2015 97.500 call (DIS150220C00097500) at an asking price of $1.20.

Performance of DIS Options After 4 Weeks

When I wrote that piece, shares of Walt Disney were trading around $93.35 per share and the options contract that I recommended was trading hands around $1.20 per contract. However, as at 2:41PM EST today, shares of Walt Disney have gained 1.09% to trade around $102.38 after reaching an intraday and new 52-week high of $102.84 earlier in the session. The DIS call options that I recommended at an asking price of $1.20 about four weeks ago, has gained some 19.05% today to a $5.20 asking price.

In essence, shares of Walt Disney have gained 10.16% in the last four weeks while the DIS Feb call was up an impressive 333.33% within the same period.

Why Are Shares of Walt Disney Soaring?

Before we go too far, it might interest you to know that the Walt Disney Company 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.

Shares of Walt Disney are surging in recent times on the strength of impressive first quarter (Q1 2015) results that the company posted on Wednesday to start this year on a winning note. Highlights of the first quarter results are presented below:

The company reported incredible earnings of $1.27 per share to mark a 27% year-over-year increase and to beat the consensus analysts’ estimate of $1.07 per share by a colossal $0.20

The company’s revenue came in at an impressive $13.4B to mark an 8.8% year-over-year increase and to beat the consensus estimate by $520M

The company reported growth across its reporting segments as revenue from Media Networks was up 11% to $5.86B, revenue in Parks and Resorts was up 9% to $3.91B, and revenue was up Consumer Products up 22% to $1.38B

Revenue in the Studio Entertainment reporting segment down 2% to $1.86B  and revenue in the Interactive segment was down 5% to $384M; however, the operating income for both segments rose by 33% and 36% respectively

Where Are Shares of Disney Heading in 2015?

One of the major reasons behind the impressive first quarter results that Disney posted was the impressive 22% increase in its consumer products’ segment revenue from  new movies “Frozen” and “Avengers”. Interestingly, Disney now has 11 movie brands that generated more than $1 billion each in annual retail revenue. We can expect more growth from the consumer products segment in 2015 as Disney releases a Cinderella film, two Pixar movies, and a Star Wars release this year.

How to Trade DIS Options

I am optimistic about the options of Disney this year and I recommend that you buy DIS call options. If you are still holding the original DIS Feb 2015 97.500 call (DIS150220C00097500), I suggest that you lock in your profits by raising stop/limit order to $5.20, and you can then raise the limit by $0.05 for every $0.10 gains. If you are new to the DIS party, you may want to consider the DIS Apr 2015 105.000 call (DIS150417C00105000) at an asking price of $2.15.

 

 

— Daily Option Alerts

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