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How Large Disney Option Traders Are Positioning Following CEO Transition

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How Large Disney Option Traders Are Positioning Following CEO Transition

Walt Disney Co (NYSE: DIS) shares fell 4% Wednesday after the company announced Bob Iger would be stepping down effective immediately as CEO after 15 years in the position.

Several large option traders were making big bets on Disney on Wednesday following the major management transition.

The Trades

On Wednesday, Benzinga Pro subscribers received four option alerts related to unusually large Disney option trades:

  • At 9:33 a.m. ET, a trader bought 567 Disney put options with a $125 strike price expiring on March 20. The contracts were purchased near the ask price at $2.73 and represented a $154,791 bearish bet.
  • At 9:47 a.m. ET, a trader bought 838 Disney put options with a $125 strike price expiring on March 20. The contracts were purchased near the ask price at $2.741 and represented a $229,685 bearish bet.
  • At 11:12 a.m. ET, a trader sold 1,000 Disney put options with a $105 strike price expiring in January, 2022. The contracts were sold at the bid price of $6.451 and represented a $645,100 bullish bet.
  • At 11:47 a.m. ET, a trader sold 1,750 Disney put options with a $100 strike price expiring in January, 2021. The contracts were sold at the bid price of $2.431 and represented a $425,425 bullish bet.
  • The four large Disney trades represented a net bullish bet of more than $687,000.

See Also: What To Make Of The Disney CEO's Early Departure, Bob Chapek's Accession

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 large 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 relatively large sizes of the biggest Disney option trades, there’s certainly a possibility they represent institutional hedging.

New Era For Disney

The mixed nature of the Disney option trading on Wednesday is representative of the somewhat uncertain outlook for Disney under new CEO and former chairman of Disney Parks, Experiences and Products, Bob Chapek. For now, Iger will remain with the company through the end of 2021 serving as executive chairman.

Iger’s departure came as a shock to many Disney investors, but he gave Chapek his vote of confidence and said Disney’s transition to a digital streaming model is the perfect time for a change in leadership.

“With the successful launch of Disney's direct-to-consumer businesses and the integration of Twenty-First Century Fox well underway, I believe this is the optimal time to transition to a new CEO,” Iger said in a statement.

Since Iger was announced as the successor of Michael Isner on March 13, 2005, Disney stock is up 355.9%, more than doubling the return of the overall S&P 500 in that time.

 

Bullish sentiment among StockTwits messages mentioning Disney has dropped from 80.8% at the end of last week to as low as 66.6% on Wednesday, its lowest level in more than three months.

Benzinga’s Take

Assuming the transition in leadership has no impact on Disney’s long-term strategic vision, Bob Iger’s departure shouldn’t have much of an impact in coming quarters, especially as long as Iger remains on board as chairman. The January 2022 put seller may see this week’s weakness simply as an opportunity to exit a previously-held long-term bearish position.

Disney traded around $123.20 per share a time of publication.

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

 

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