Investment Review №356. A Reassessment of Values

LONG CALL ON DIS

Options Idea

Trade Thesis

Buy the DIS 115 Call as a bet on further share-price recovery and a potential re-rating ahead of Disney’s November 17 earnings. Improving streaming profitability and strong Experiences results could support the FY2027 EPS outlook.

Key Arguments

  • Disney+ and Hulu are improving profitability; subscription price increases could lift ARPU if churn remains contained.
  • Experiences continues to grow revenue and operating income, supported by theme parks and cruise expansion.
  • A moderate forward P/E (~14–15x) and November 17 earnings offer room for a re-rating if guidance is strong.

Risk Management

  • DIS < $115 at expiration: maximum loss of $395.
  • $115–118.95: partial loss.
  • DIS > $118.95: profit at expiration.
  • Target premium: $6.20 (+57.0%).

Risks: weak advertising demand, higher ESPN rights costs and subscriber churn after price increases. Disappointing November 17 earnings or a post-earnings IV decline could sharply reduce the option’s value.

Trade Parameters

LONG CALL ON DIS. Trade parameters

Strategy Profit and Loss

LONG CALL ON DIS. Strategy profit and loss

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