Option Traders Bet $3.8M Disney Is Headed Lower In 2020

Shares of Walt Disney Co DIS are up more than 34% this year and are finishing 2019 on a strong note following a successful Disney+ streaming service launch in November.

On Friday, market participants saw an unusually large bearish bet that the Disney fairy tale will come to an end in early 2020.

The Disney Trades

Benzinga Pro subscribers received notable option alerts Friday related to unusually large trades of Disney options.

• At 11:39 a.m., 1,650 Disney put options were purchased $170 strike price expiring on March 20 at the ask price of $23.31. The trade represented a $3.84-million bearish bet.

Option traders also made bullish bets on Disney Friday. The following were some of the alerts Pro subscribers received:

• At 9:41 a.m., 500 Disney call options were purchased with a $147 strike price expiring on Dec. 27 near ask prices ranging from $2.053 to $2.101. The two trades represented a more than $215,770 bullish bet.
• At 10:01 a.m., 977 Disney call options were bought with a $147 strike price expiring on Dec. 20 at the ask price of $1.50. The trade represented a $146,500 bullish bet.
• At 10:19 a.m., 502 Disney call options were bought with a $140 strike price expiring on Jan. 17 near the ask price at $8.426. The trade represented a $422,985 bullish bet.

While the large bullish trades outnumbered the large bearish trades, the $3.84-million put purchase far exceeded the value of all the bullish trades combined.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge.

In this case, given the number of trades and the sizes of some of the largest trades, at least some of the action could easily have been institutional hedging.

Disney's Latest Subscriber Numbers

Disney reported more than 10 million subscribers for Disney+ within 24 hours of the streaming service's launch and said it expects to have between 60 million and 90 million subscribers by 2024.

The only major piece of relevant news out Friday was a report by Bloomberg that cord-cutters tend to lose interest in these types of services once their free trials expire.

CNBC reported earlier this week that Disney+ eclipsed 22 million downloads on mobile devices, according to the app tracking company Apptopia.

In addition, Google’s annual search trends report revealed Disney+ was the top search of the year, suggesting major interest in the service.

Despite Disney shares hitting new all-time highs following the Disney+ launch, TD Ameritrade reported its users were net buyers of Disney in November, suggesting Friday’s large put buyer is going against the retail grain.

Disney shares were trading slightly higher at $147.01 at the time of publication Friday. 

Benzinga’s Take

Assuming Friday’s large put buyer doesn’t have some special insight into Disney+ subscriber trends, there’s a good chance the trader is simply betting the stock has run too far too fast and is due for a pullback in early 2020. Disney’s market cap is up more than $100 billion in 2019, and it may take a while before Disney+ is able to fully justify that gain via added revenue growth.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Netflix Analyst Downgrades Stock, Says Streaming Service Lacks Operating Leverage

How To Read And Trade An Options Alert

Photo courtesy of Disney.