Option Traders Heavily Bullish On Disney To End The Year

Heading into the last few days of the trading year, Walt Disney Co DIS is having a solid day of gains, up more than 1.5% with less than two hours of trading Tuesday.

While share volume is solid at 9.2 million shares (versus the 10 day average of 9.9 million), the more interesting fact is how options traders are heavily bullish on Disney to end the year.

What Happened: In the options markets today, traders have moved almost 202,000 contracts on Disney with approximately 170,000 calls and 32,000 puts (image below).

Looking at this data, options traders have been overwhelmingly bullish on Disney with approximately 84% of all options being calls on the day.

This is in stark contrast to the open interest (prior to today's trading) which sat at roughly 888,000 calls and 810,000 puts, translating to only 52% of the options being calls. Hence, today's option activity is particularly bullish.

On top of this, more than 51% of all the options traded today are short-dated, meaning they are expiring this Friday.

Why It Matters: Short-dated options tend to be traded quickly since they are exposed to heavy theta decay (time) with only three more trading days left. This means they are likely to get monetized faster as the week goes on. While these short-term options could provide a strong bullish tilt for the week, they will likely increase volatility as they expire at the end of the week, setting up next week to potentially be a volatile week for the stock.

What's Next: The next largest expiry by volume is the Jan. 21 expiry with the lion's share of options contracts on the call side and solid open interest between the $150 and $170 strikes (see below).

If the calls maintain control, they will use $150 as support and try to make a push up towards $170 by the Jan. 21 expiry, which is the next major resistance ahead.

If the bears take control back, they will need a weekly close below $150, which then puts the $145 strike into focus with a strong open interest on the put side for the Jan. 21 expiry.

Photo by Chuck Givens on Unsplash