Options Traders Charge Netflix Stock After Disney Pulls Out

The weekly 8/11 options series is very popular today

by Josh Selway |

Published on Aug 9, 2017 at 11:06 AM

Netflix, Inc. (NASDAQ:NFLX) is 2.5% lower today to trade at $173.88, putting the FAANG stock on pace for its lowest close since before its July 18 post-earnings bull gap. Weighing on the shares is news Disney is pulling its content from Netflix to start its own streaming platform. As a result, NFLX options trading is accelerated, with puts crossing at 1.6 times the average intraday pace.

The weekly 8/11 options series is extremely popular today, accounting for nine of Netflix's 10 most popular strikes. In the lead is the 170-strike put, though it's not exactly clear how traders are positioning themselves. For anyone buying to open contracts here, they're betting on NFLX breaching the $170 level by the end of the week, when the series expires. Meanwhile, sell-to-open activity would mean traders are betting on this strike acting as support for the tech stock. The equity hit an intraday low of $170.01 earlier.

Other options seeing heavy attention today are the weekly 8/11 167.50-, 172.50-, and 175-strike puts. On the call side, the 175 and 180 strikes from the same series are leading the way, and both are seeing a mix of buying and selling activity. So, despite today's pullback, it appears some options traders are betting on Netflix rebounding by Friday's close.

More broadly, NFLX options traders have taken a bullish slant. For example, call buying has outpaced put buying at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) in the past 10 days. Put selling has actually been more popular than put buying over this time frame, as well.

Meanwhile, volatility data suggests it's a better time to buy premium on NFLX than sellit. This is evidenced by the equity's Schaeffer's Volatility Index (SVI) of 30%, which sits below 85% of comparable readings from the past year. This means near-term options are pricing in relatively low volatility expectations at the moment. 

Turning back to the charts, Netflix stock remains safely above the all-important 50-day moving average, which sits down at the $165 level and helped usher the shares higher in the first four months of the year. And it would be hard for shareholders to complain about today's NFLX pullback, considering the shares have added roughly 86% year-over-year. 

Receive Schaeffer's Opening View every morning before the bell.

MORE | MARKETstories

Dow Closes Back Above 22K as Rate-Hike Expectations Cool
The DJIA brought home a fourth straight win, reclaiming its foothold above 22K
Bullish Options Active as RIG Stock Sinks to New Lifetime Low
RIG call options are unusually active today, even as the stock sinks to new lows
The VIX Options Volume Record That Might Surprise You
How options traders are playing equities and the VIX after last week's stock market mayhem



By MG 2016
In March of 2016, I was introduced to Expiration Week Countdown.  The results are better than words!
Options trading made simple.
Schaeffer's Investment Research, Inc. is dedicated to providing subscribers advantages in options trading and investing.  Our independent market research services create profitable opportunities for investors at every level.