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Option Trends: Netflix, Inc. and, Inc.

Skeptical put buyers have targeted NFLX, while AMZN has seen call buyers emerge

by 6/9/2014 11:21:07 AM
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Options traders have taken decidedly different paths on a pair of streaming video pioneers: Netflix, Inc. (NASDAQ:NFLX) and online retailing giant, Inc. (NASDAQ:AMZN). Per data from the major options exchanges, speculators have been executing bearish plays on Netflix and scooping up bullish calls on Amazon. Here's a closer look at what's been happening in the options pits for these two high-profile names.

Traders on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), have bought to open 7,259 NFLX puts during the past five sessions, compared to 6,113 calls. The resulting five-day put/call volume ratio of 1.19 highlights a growing preference for long puts over long calls.

Schaeffer's put/call open interest ratio (SOIR) for Netflix, Inc. (NFLX) since March 2014

Expanding the scope to two weeks of activity and including data from the NASDAQ OMX PHLX (PHLX) tells a similar story. Netflix's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.10 is higher than 85% of all readings taken during the last year. What's more, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.37 is just 11 percentage points away from an annual high. In other words, short-term put open interest has rarely exceeded call open interest by a heftier margin during the last 12 months.

And meanwhile, on the charts, NFLX has been on a bullish tear since its April 28 year-to-date low of $299.50. In the ensuing weeks, the equity has surged roughly 42% to its present perch of $425.60.

Still, the options crowd isn't the only contingent of Netflix, Inc. (NASDAQ:NFLX) skeptics. Sixteen of the 29 brokerage firms following the security rank it a "hold" or worse, and the consensus 12-month price target of $412.09 is actually below the stock's current price. Meanwhile, NFLX short interest jumped by nearly 38% during the last two reporting periods, and now represents almost 10% of the stock's float. An exodus of short sellers -- or a change in heart among analysts -- could be beneficial to NFLX shares in the near term.

Moving from the land of Orange is the New Black to the home of Alpha House, AMZN has seen entirely different activity in its options pits. During the last five days at the ISE and CBOE, traders have scooped up 15,258 calls, versus 5,908 puts, resulting in a call/put volume ratio of 2.58. Adding the PHLX and expanding the view to 10 days reveals a call/put volume ratio of 2.16, which rests at an annual high. This acceleration in call buying has been reflected in the stock's SOIR, as well. The ratio currently stands at 0.88, in the 9th annual percentile.

On Wall Street, 26 of the 30 analysts following, Inc. (NASDAQ:AMZN) have handed down a "buy" or better rating, and there are zero "sell" designations to be found. The average 12-month price target, meanwhile, comes in at $419.33, or roughly 28% north of the stock's current price. All of these votes of confidence come despite the stock having surrendered nearly 18% in 2014 (starkly underperforming the broader market) to trade at $327.86.


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