On the other hand, if you’re more of the bearish persuasion on Netflix, the following trade could potentially net you a 100% gain on a post-earnings plunge: Remember, all options are priced as single options, but bought and sold as 100 option contracts. A maximum profit of $2.50 is possible if NFLX closes at or above $255 when November options expire.The cost is $2.45 per pair of options (or $245 per pair of contracts).Sell the NFLX November $255 call - $17.45 ($1,745 per contract).Įntering both options simultaneously is called a spread.(Note: All options prices were taken at about noon on Monday, October 17. Now, with our potential upside and downside limits set, let’s see some trade ideas that will not be added to the Great Stuff Picks portfolio!įor those of you bullishly inclined on Netflix’s earnings report, the following trade has the potential to net a 100% gain. Furthermore, never bet on the full implied move … you’re gonna have a bad time. I mean, you don’t want to enter a trade that needs NFLX to move 20% or more if the expected move is only 18%. Knowing these expected moves is critical when trading options. In other words, November options traders expect NFLX could either rally to $284 or plunge to $195. Netflix’s November implied volatility indicates that options traders are pricing in a potential post-earnings move of roughly 18%. So in the interest of letting y’all make up your own minds, here are my bullish and bearish options trade ideas for NFLX stock heading into earnings.īut first, we need a little bit more information. I have to be honest, Great Ones, if we were not in a bear market or staring down a recession, this would be a very solid contrarian bull play for Netflix.īut in this market? There are absolutely no guarantees. NFLX 90-day put/call open interest ratio is at 1.08 - a heavy bearish bias.Short interest is only 2.5% of NFLX’s total float - no short squeeze possibility.$250 is a major resistance point due to high option open interest and psychological resistance - potential inflection point.NFLX has resistance near $285 due to its descending 200-day moving average - limited upside.NFLX recently regained its 50-day moving average - good.NFLX stock is down more than 60% this year - potentially a bargain.Let’s do a quick NFLX stock assessment first: But ad revenue? That remains the big question for Netflix, and any positive info on the ad revenue front tomorrow could have a very bullish effect on NFLX stock. So subscriber growth is expected to be up. While we are encouraged with ad potential over time, we believe meaningful positive revisions are unlikely near-term due to forex and slowing ad-free subscription growth. However, he has some reservations about the strength of ad revenue: Patterson has a bullish outlook on Netflix subscriber growth in Q4 due to the cheaper ad-tier offering. In fact, KeyBanc analyst Justin Patterson just reiterated his sector weight rating on NFLX stock ahead of Netflix’s earnings report. The new ad tier launches November 3, and analysts expect big things for both ad revenue and subscriber growth for Netflix’s new offering. On that front, Netflix recently signed a deal with ad and ratings firm Nielsen to improve its ad performance … which is a really good thing, since Netflix is launching an ad-supported tier to its streaming options. The fact is, ad revenue is down across the board, with very few companies forecasting even meager growth in ad revenue. Remember that Alphabet, Meta Platforms, Twitter, Roku … and pretty much everyone else that focuses on ad-based revenue is struggling massively right now. Unless ads are the new “hotness” on Wall Street, not subscriber adds. We’ll find out for sure tomorrow afternoon, but I would wager that anything less than 1 million new subscribers will tank NFLX stock. What really matters is subscriber numbers.Īnd on that front, Netflix has been in a three-quarter slump, shedding nearly 1 million subs in Q2.ĭuring its Q2 earnings report, Netflix said it expected to add 1 million subs during Q3. The “whisper number” currently rests at earnings of $2.31 per share … which would be a major boon for NFLX stock if the company hits that target.īut as we all know, Wall Street largely ignores earnings and revenue figures from streaming companies like Netflix. Wall Street is expecting a profit of $2.11 per share on revenue of $7.84 billion. Netflix ( Nasdaq: NFLX ), the former “Sultan of Stream,” is slated to enter the earnings confessional after the market closes tomorrow.
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