Disney (DIS) Might Be a UFO!

I'm pretty sure those Mickey Mouse ears are just two UFOs put together! Either way, it might be worth trading. But first...

What’s the Word on the Street?

Consumer sentiment rose this month, but the market is still down today. The Administration is reportedly pushing for 15-20% tariffs on the EU (more than the currently imposed 10%, but less than the 30% set to be implemented on August 1st). The EU is a pretty big trading partner, but the deal is still being worked out.

We’re still in the early innings of this earning season and so far 86% of companies that have released their earnings have beat expectations. Even with all the turmoil caused over the possible firing of the Federal Reserve Chairman, it‘s been a positive week for the market overall.

Disney (DIS)

What Is It?

The Walt Disney Co. engages in the business of international family entertainment and media enterprise. It owns and operates television and radio production, distribution and broadcasting stations, direct-to-consumer services, amusement parks, and hotels. It operates through the following business segments: Disney Entertainment, ESPN, and Disney Parks, Experiences, and Products. The company was founded by Walter Elias Disney on October 16, 1923 and is headquartered in Burbank, CA. The listed name for DIS is The Walt Disney Company.

Why Is It a Possible UFO?

Primarily its current share price relative to its fair value, what other option traders expect, and its volatility are the reasons DIS could be a UFO.

What About Recent News?

Today Netflix released their earnings and it failed to impress investors. That combined with the Peacock announcing a price hike, has made the market cautious on streaming services. But Disney is more than just a streaming service. It’s an entertainment company with parks, cruise ships, and hotels. With consumer confidence continuing to rise, families could feel better about spending on Disney vacations. That combined with its increasing foothold as a streaming service, Disney could still have room to run.

What’s the Current Price?

DIS is an interesting stock to trade because I always feel like it has so much potential but never quite reaches it. I’ve traded this one over and over in the past when I felt like it was being unfairly punished by investors, and now I see an opportunity again to trade it. Although it’s only risen ~8% on the year, it’s advanced a mighty ~43% in the past 3 months.

What’s the Fair Value?

I’d first like to emphasize that fair value is subjective. Many analysts at many banks and institutions rate stocks differently and assign fair value in their own unique way. So, what I like to do is take all the recent fair values since the most recent earnings report and average them. In this case…

Since DIS’s most recent earnings report on 05/07/2025, it has received 12 ratings and taking the average the fair value might be somewhere around: $130 (actually $130.58, but I’m rounding down). 11 ratings are a buy and the other from Morningstar is not shown. The lowest rating is $120, the highest is $144.

What Do Options Traders Think?

Calls are trading over equidistant puts, which means traders think there is a chance to the upside. You can see because… forget about the green columns and focus on the red. Notice how on the right side for the $114 put it says $1.98, it’s $2.31 for the equidistant call at $127.

The premium (the credit you receive for executing the trade) is currently less for selling puts, as opposed to selling calls. Basically because of that, option traders expect the stock to go up, rather than down.

How About Volatility?

The IV rank (the purple line) for DIS (stock price in blue) is currently hovering around 32.75, which is somewhat elevated. This makes short strategies (which are what I prefer) more attractive.

What’s the Trade?

My preferred trade is a variation of the wheel without the rolling, AKA cash-secured puts. I typically like to target stocks that offer a dividend and are below fair value. 

Why a dividend? If the trade results in assignment and I’m on the hook for X amount of shares, I can at least be satisfied knowing I picked a (hopefully under fair value) company that will pay me a small amount while I run the other side of the trade AKA covered calls.

It’s a fairly low-risk strategy (all options trading is risky!), that has a higher probability of success, but requires a higher amount of collateral. 

DIS does offer a dividend with a yield of 0.82%.

So if you saw the most recent image above, I already STO (sold to open) 1 contract of the $114 put for the August 29th expiration. I like to have a DTE (Days To Expiration) that is around ~45 days.

When the trade reaches 50% profit I will buy it back. I don’t like to be greedy and go for more profit, because I would rather not waste my time being in a trade for too long.

What About Alternative Trade Ideas?

1. If the collateral requirement is too high, another idea is a put credit spread. You would sell a put at a strike below the current share price and then buy a put at a lower strike than the put you sold. By doing so, you will avoid the collateral requirement of a cash-secured put, but the credit received will be smaller. Also, if the trade goes sideways, you will not be assigned shares so no collecting dividends and running covered calls afterwards.
2. Just invest! 1 share or even fractional shares are a way to get a foothold in a stock that you think might increase in value.

Wait…Where Are the Candlesticks? And All the Other Indicators?

I know many traders love their candlesticks and a ton of indicators. I prefer simplicity. Candlesticks aren’t necessary unless you’re the kind of trader that wants to try and pick the perfect moment to execute a trade, and even then it’s not a sure thing. 

As for indicators, there are a ton. Some of them work sometimes. None are perfect. I don’t want to get bogged down with too many. You’ll drive yourself crazy looking at too many of them, so find a handful you like and stick with those.

Disclosure

• I currently have open trades with DIS (as mentioned in this post).
• No trade is a sure thing. There is always risk involved. 
• This blog post is not meant to take the place of financial advice, but hopefully acts as a guide for learning or informational purposes.