Disney (DIS) Might Be a UFO!

Wait a minute…I think that blue dog might actually be a UFO in disguise!

I traded DIS recently and decided to go back for more before earnings next week. But before I get to Disney...

What's the Word on the Street?

The market is flat/mixed as I write this. Which is somewhat a surprise because I expected the market to be solidly up because of the trade deal with the EU announced yesterday. It’s important to remember we’re already at record highs and there’s a lot happening this week.

A bunch of earnings from major companies, GDP for Q2, the FOMC interest rate decision (expected to leave interest rate as is), PCE, the job’s report for July, and more!

That said, there are still UFOs to trade, and today is…

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?

Disney has had a mixed bag with the movies they’ve released this year. The Fantastic Four: First Steps movie released last week and made $118 million in the U.S. and $220 million internationally for its opening weekend. It was the highest-grossing non-sequel Marvel movie in six years.

Disney also released the live action remake of Lilo and Stitch movie which has made over 1 billion at the box office.

Despite those successes, the live action Snow White and Pixar’s Elio did not do well.

But Disney is more than just movies and analysts have been boosting their ratings recently, believing that Disney “is ready to rally after a lost decade”.

What’s the Current Price?

DIS has risen ~7% this year, but in the past 3 months alone it’s gone up over 32%. That’s a pretty big move, but it’s down on the month by ~3% and is currently down on the day, so I want to take advantage of the slight pullback while it‘s still under fair value.

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: $130.58.

All ratings are a Buy, while the Morningstar rating is unknown. The lowest price target is $120, while 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 $200 put it says $2.00, it’s $2.47 for the equidistant call at $125.

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 30.75, which is somewhat elevated (IV rank goes from 0-100). 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.

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

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. 

So if you saw the most recent image above, I already STO (sold to open) 1 contract of the $114 put for the September 5th 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.

Disclosures

• I currently have an open trade 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.