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Netflix Earnings Trade Ideas

Published 04/21/2014, 07:47 PM
Updated 05/14/2017, 06:45 AM

These ideas were giving to premium users at 1:20 yesterday. Analysis and ideas reflect the market at that time. Pricing of ideas has been updated.

Netflix Inc (NASDAQ:NFLX) reports Monday after the close. Heading into the print it has reversed off of a bottoming near the retest of the 100% retracement of the move that took it lower. I wrote positively about the stock last week, here. Not a lot has changed since that assessment.

The price is testing the 20 day SMA into the print tonight, remains over the 200 day SMA and continues to look positive from both the RSI and the MACD. There is a resistance zone from 350 to 354 and then 365 and 380 followed by 400. Support lower is found at 335 and 325 followed by 313 and 298-300. The stock has moved on average 18.1% over the last 6 reports or $62.50. This creates an envelope of 282 to 407. Wow, quite a range. The weekly options show an expectation of only about $40 in the at the money straddle though. Narrower but still a range of 305 to 385. Implied volatility is high at over 130% with the May IV at only 62% and June at 49%. Expect a volatility crush on the short end.

NFLX Daily

Trade Idea 1: Buy the April 25 Weekly 357.5/380 1×2 Call Spread for $1.30 (same as earlier). This takes margin and you need to be prepared to hedge this on a move over 380 and it loses money on a close over 401 Friday.

Trade Idea 2: Buy the April 350/360 Call Spread and sell the April 300 Put for $1.75 (50 cents earlier). This takes margin for the short Put. On a move higher it offers a 20:1 reward to the cash outlay. You are exposed to owning the stock if it moves under 300 this week.

Trade Idea 3: Buy the April 350/380/410 Call Butterfly for $6.85 ($6 earlier). A margin free trade has maximum pay out at 380 and wins between 356 and 394 at Expiry.

Trade Idea 4: Buy the April 350/380/400 broken wing Call Butterfly for $8 ($7 earlier). A margin free trade has maximum pay out at 380 and wins every where above 357 at Expiry.

Trade Idea 5: Sell the April 300/380 Strangle for a $10.20 credit (same as earlier). Makes full $10.20 between 300 and 380 and protects to 290 to the downside and 390 to the upside.

Trade Idea 6: Sell the April 300/380 Strangle for a $10.20 credit and buy the April 350/360 Call Spread for $4.90, a net of $5.30 credit ($5.65 earlier). Makes full $5.30 between 350 and 300 and protects to 295 to the downside. Above 360 it makes $15 until 380 and then protect to 395 to the upside.

I entered trade #6 earlier at a $5.61 credit.

Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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