Put DIS On Your Watchlist (Or Try This To Get Paid Now)
They often say that Disney World is the most magical place on earth. Maybe. But trust me, that charm wears thin when you’ve been standing in lines for about eight hours at the end of a tiring day. And that’s a conservative estimate.
My family and I just got back from Mickey’s house last week. The shortest queue of the entire trip was 30 minutes… but that was only for ice cream.
The kids were out of school for winter break, and we thought February might be a bit less crowded than the peak summer months. Judging by the throngs of people, there is no “off-season” in Orlando. Approximate wait times for most of the bigger attractions were 120 minutes or more. Trying to ride more than four or five in a single day is almost physically impossible.
The one exception: Star Wars Rise of the Resistance at Hollywood Studios. It’s Disney’s most expensive, ambitious and immersive experience yet. But the line is virtual. As soon as the gates open promptly at 8 AM, visitors log in to their Disney apps and click a button to reserve a boarding pass for the ride.
Sounds simple enough. Except that every boarding pass for the entire day is gone within 30 to 60 seconds. Don’t blink. Arrive at the park at 8:01, and you’ll be greeted by a sign out front apologizing that there are no more available slots for the day. We got in line at 6 AM just to be sure. And fortunately, my teenage son has fast phone fingers. Once the system went live, we were lucky to snag boarding pass number 64 (yes, it was worth it).
There’s not much else Disney can do to improve guest experiences. They even give each park-goer three “FastPass” tickets per day, which are essentially shortcuts to the front of the line. Unfortunately, we arrived at the park to find that every single FastPass reservation time slot for every single ride was already booked from open to close… for the entire week.
Lesson learned: Book your FastPass reservations at least a few weeks in advance.
In the end, it was still time well spent with family. And that’s why people look past the long lines. It’s also why Disney can raise prices year after year without making the slightest dent in the crowds. Even at $109 for a one-day pass, families eagerly file in faster than ever. That’s the textbook definition of an inelastic good.
The Power Of The Disney Brand
Some of you may be familiar with a concept my colleague Jimmy Butts talks about often – irreplaceable assets. The Disney brand certainly qualifies as just that.
Even on vacation, I couldn’t help but marvel at Disney’s ability to monetize its brand. It’s not just the gate receipts, but food, lodging, souvenirs, and experiences.
The Disney World campus draws over 58 million visitors annually. The Magic Kingdom alone welcomes more than 57,000 paying customers on an average day. And to think when old Walt started buying up large tracts of rural Florida swampland in the 1960s, people thought he was crazy.
Of course, theme parks are just one cog in the Disney machine. Thanks to its acquisitions of Marvel and Pixar, the firm’s movie studio generated an unprecedented $13 billion in global box office sales last year. This same media empire also owns ABC and ESPN. And the new Disney+ video streaming service has already attracted 40 million subscribers after launching just a few months ago.
I’m Putting Disney On The Watchlist
Yet, even mighty Disney (which has a park in Shanghai) isn’t immune to the coronavirus fears. The stock has fallen to its lowest levels in nearly a year.
This, combined with the departure of longtime CEO Bog Iger, is creating a possible entry point for new investors. Personally, this is one ride I’d like to jump on. But like all the incredible attractions at Disney World, I don’t mind waiting. A further pullback below $110 would make DIS a very intriguing portfolio candidate.
My colleague Amber Hestla — she’s the Options & Income Strategist over at Maximum Income — has an alternative way to play this Disney trade. If you’re already interested in adding DIS to your portfolio, her covered call strategy lets you get paid immediately. And it only takes one extra step.
Amber’s Alternative DIS Trade:
“DIS is currently trading around $112.30. I recommend buying 100 shares of DIS and then selling one DIS Apr-17 $120 Call (DIS200417C00120000) for every 100 shares of DIS you purchased. That’s a call option on DIS with a strike price of $120 that expires on April 17, 2020.
As soon as you sell this covered call, the premium will be deposited into your trading account. It’s just like receiving a dividend, except you get to pick when and how much you get paid.
Currently, the DIS Apr-17 $120 Calls are trading around $3.00 per share. The goal for this trade would be to enter at a cost basis of $110 or less. (Your cost basis is simply the price you purchase shares at minus the premium received when selling the call. So, $112.30 – $3.00 = $109.30, which is less than $110.)
If DIS trades above $120 on April 17, we’d keep the income we received from selling the call, but we’d have to sell DIS at $120 per share.
In this case, we’d realize a profit of $10 per share ($120 – $110 cost basis), or $1,000 per 100 shares. This is a profit of 9.1% in 44 days (75% annualized).
And if DIS doesn’t make it to $120 by April 17, we simply keep the $300 premium we received and sell another call option, making even more money in the process.”
If you love getting dividends, but hate waiting months and months to get them, you’re going to like this strategy… It’s like an “accelerated dividend” program that lets YOU pick when to get paid. Amber’s readers have already collected $210,297 this way – here’s how you can, too…