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Friday, April 12, 2024

Disney Options In Play Ahead Of Earnings


Today’s tickers: DIS, NWL & HAIN

DIS – Walt Disney Co. – Light front-month call buying in Disney this morning suggests some traders may be positioning for shares in the name to rally following the Company’s second-quarter earnings report on Tuesday of next week. Shares in the operator of the Happiest Place on Earth are down 2.0% at $42.92, joining in on the broad market decline on the heels of today’s jobs report. Traders picking up the May $43, $44 and $45 strike calls may see the value of their positions increase prior to expiration should Disney’s earnings beat expectations and send the price of the underlying higher. The most active DIS contracts at present are the Oct. $47 strike calls, with 5,000 lots changing hands in the first half of the session against open interest of 1,178 positions. It looks like most of the calls were sold for a premium of $1.17 each. The trader or traders responsible for the call sale keep the full amount of premium as long as shares in Disney fail to rally above $47.00 by October expiration. Strategists may be long the stock and selling covered calls, however, if these are naked short calls, sellers of the options face unbridled losses above a breakeven share price of $48.17.

NWL – Newell Rubbermaid, Inc. – A large block of call options sold on Newell Rubbermaid launched the consumer products maker onto our ‘hot by options volume’ market scanner this morning. The massive trade indicates the seller of the options expects the price of the underlying to remain below $20.00 through June expiration. Shares in NWL are currently down 1.5% on the day at $18.37 as of 11:55 pm in New York. It looks like the trader responsible for the transaction sold 30,000 calls at the June $20 strike to pocket premium of $0.15 per contract. The call seller walks away with the full amount of premium in hand if the calls expire worthless next month. The transaction in Newell Rubbermaid options does not appear to be tied to any trade in the underlying shares, although the call seller may already hold a position in the stock. If these are covered calls, the options play provides some extra income but limits profits on the upside, while a naked short sale of 30,000 contracts could result in devastating losses in the event of an unanticipated sharp move higher in the shares above $20.15 ahead of June expiration.

HAIN – Hain Celestial Group, Inc. – Shares in the maker of natural and organic food products rallied as much as 8.8% today to an intraday and new all-time high of $51.48 after the Company posted better-than-expected third-quarter earnings on Thursday. Front month call and put buying on Hain Celestial indicates some traders are positioning for further upside, while others may be bracing for nearterm turmoil. Bullish players picked up around 740 of the May $50 strike calls for an average premium of $0.78 apiece this morning, and may profit at expiration in a couple of weeks if shares in HAIN settle North of the average breakeven price of $50.78. Meanwhile, traders purchasing more than 300 of the May $45 strike puts today for an average premium of $0.21 each are prepared for the stock to reverse recent gains. Put buyers profit if Hain’s shares drop more than 11.0% from the current price of $50.47 to breach the effective breakeven point on the downside at $44.79 by expiration.


Caitlin Duffy

Equity Options Analyst

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