Disney’s upcoming earnings report is generating significant anticipation. Let’s analyse the potential playability of its options, considering both long and short volatility strategies.
First of all, let’s study DIS past moves outlook. How did it move and how volatile it is around earnings?Let’s look at the histogram of past moves over the last 10 years — showing the past moves values versus their occurrence, so essentially a frequency chart of the past moves.
We see that, as expected, the distribution looks centered around the most frequent move around +/-4%.
Moves above and beyond this value are less frequent, however we notice some occurrences of big downward moves around -7 and -8%.
Overall, unlike other very volatile stocks on earnings, DIS moves seem well contained with maximum values around +/-11%, and one outlier move of -14% that happened on 2022–11–08.
This is a first good signal for perhaps a short volatility trade, where we would sell options to profit from IV crush, betting that the move will be lower than the implied one.
Looking at the exact breakdown of past moves, we see that DIS was actually quite volatile in the last year, with somewhat big moves exceeding that +/-4% average we noted,
Notice how the amplitude of move on earnings in 2023 is quite higher than during 2021 for earnings.
This is not very reassuring for our short volatility thesis.