Trading $NFLX Options - PowerPoint PPT Presentation

Loading...

PPT – Trading $NFLX Options PowerPoint presentation | free to download - id: 7dbf6d-ZDJjY



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Trading $NFLX Options

Description:

Netflix $NFLX can be a volatile stock to trade, so here’s some advice on how to trade $NFLX options. – PowerPoint PPT presentation

Number of Views:12
Slides: 37
Provided by: OptionsTradingR

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Trading $NFLX Options


1
  • OPTIONS TRADING

Trading NFLX Options
2
Welcome to Options Trading Research Your premier
site for news and information on Profitable
Options Trading. For more info on Options Trading
visit our website www.OptionsTradingResearch.com
3
  • Get Your Free Report For The Best Options To Buy
    For 2016!
  • Well tell you about this
  • Special Offer
  • at the end of the video!

4
  • Hi, My name is Steve and Im with Options Trading
    Research, today were reviewing our recently
    published article

5
  • Trading NFLX Options

6
  • Typically, I like to write about general
    strategies for trading options. Ill choose some
    overarching topic, like using options to trade
    earnings, and write about broad-based strategies
    for doing so.

7
  • In something of a change for me, Ive decided to
    start writing more often about trading options on
    specific stocks. Theres growing interest among
    options traders to learn about more
    stock-specific trading strategies.

8
  • Sometimes a one-size-fits-all approach works with
    options. But, often times tweaking strategies
    based on stocks is the way to go. As such, were
    going to start off this new series of articles
    with the highly popular Netflix NFLX.

9
  • As you probably know, Netflix is a widely-used,
    subscription-based Internet television network.
    What you may not realize is just how popular
    NFLX options can be.

10
  • Okay, so what options trading strategies are good
    for trading NFLX options?

11
  • Lets start by looking at Netflixs stock
    performance over the last year.
  • Heres the chart of NFLX

12
(No Transcript)
13
  • NFLX has been quite the high flyer in recent
    years. Its one of most popular, heavily traded
    Internet stocks and is often associated with
    momentum trading.
  • Its pretty clear from the chart that NFLX has
    had a great year.

14
  • In fact, its up 126 year-to-date. The stock
    also split 7 to 1 back in July another sign of
    just how high the share price had gotten.

15
  • Lately though, the stock has been quite a bit
    more volatile. As a matter of fact, the stock
    has recently plunged below the 50-day moving
    average on worse than expected earnings news.

16
  • So now what?

17
  • Knowing what options strategies to use on NFLX is
    all about understanding the situation the company
    is in. Lets start with the earnings and why the
    stock is down.

18
  • NFLX isnt the type of stock that trades based on
    valuation. Its a growth stock, so growth is
    mostly what investors are paying attention to
    when earnings comes out.

19
  • That being said, NFLX missed growth estimates for
    US subscribers for this past quarter.

20
  • More specifically, the company added 880,000
    subscribers in the US compared to the 1.25
    million predicted. Thats quite a big miss.
    However, the news was somewhat offset by better
    than expected international growth.

21
  • Whats more, management is blaming the
    introduction of new chip-based credit cards for
    the large drop in US subscribers.

22
  • Customers who arent automatically renewed
    (because they have a new card number) often dont
    renew right away (if at all).

23
  • On the other hand, higher programming costs due
    to NFLXs focus on original programming also hurt
    profits. In fact, profits came in at just 29
    million well below the 51.2 million analysts
    expected. Revenues also fell short.

24
  • As of this writing, NFLX is down over 8, so
    initial reactions to earnings are clearly
    negative. Is the selling overdone, or this
    quarter really cause for alarm? Either way, I
    believe this is a good time to use put spreads.

25
  • Depending on your view of NFLX, you could go with
    a put credit spread or put debit spread. Follow
    the links for more info on each strategy.

26
  • The put credit spread is a bet that NFLX isnt
    going to continue to decline. It could stay
    neutral or climb for the trade to be a winner.
    Basically, youd be selling a put near-the-money
    and buying a farther out-of-the-money put.

27
  • The short put should be juicy because of the
    current volatility, so youll collect a hefty
    premium. The long put serves as protection and
    makes margin requirement much more reasonable.

28
  • This is the strategy youd use if you think the
    selling is overdone. The new chip-card situation
    is definitely plausible based on my own
    experience.

29
  • Plus, international sales are growing fast and
    new programming should pay dividends in the
    future.

30
  • However, if lack of growth is a major concern to
    you (along with falling profits and higher
    costs), Id go with the debit spread instead.
    NFLX, typically a volatile stock, could certainly
    continue to fall.

31
  • But, puts will be expensive due to the added
    volatility. Thats where using a debit spread
    comes into play. In this case, youd sell an OTM
    put against a near-the-money put to help reduce
    the cost.

32
  • Meanwhile, the payout could still be quite
    robust, even with reduced risk. Whether you
    believe NFLX is going to rebound or keep falling,
    using put spreads is the way to go.

33
  • A credit spread is the best strategy if you think
    the selling is going to stop. And, a debit
    spread makes the most sense if you think the
    decline is going to continue.

34
  • Want More from Options Trading Research.com?
  • Follow us on Social Media

35
  • Want more FREE information on Options Trading?
  • OptionsTradingResearch.com

DOWNLOAD NOW!
36
READ THIS FREE REPORT!
The Best Options To Buy Right Now!
About PowerShow.com