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Option volume picked up on Netflix, Inc. (NASDAQ:NFLX) yesterday, especially on the call side of the aisle. By the closing bell, the streaming video concern had seen roughly 99,000 calls change hands -- more than twice its average daily volume. Digging deeper, most of the action transpired at weekly strikes, with bulls betting on a short-term bounce for NFLX, which succumbed to since-denied rumors that Carl Icahn sold a stake in the firm.
Jumping right in, traders established new positions at the weekly 4/5 170- and 175-strike calls, which saw open interest increase by 2,560 and 3,090 contracts, respectively, overnight -- tops among all strikes. Plus, the majority of the calls traded on the ask side, underscoring our suspicions of newly bought bullish bets.
By purchasing the 170-strike calls at a volume-weighted average price (VWAP) of $2.78, the traders will profit if Netflix, Inc. (NASDAQ:NFLX) climbs back atop the $172.28 level (strike plus VWAP) by tomorrow's closing bell. Meanwhile, the VWAP of the 175-strike calls was $1.28, indicating a breakeven of $176.28 for the buyers. Risk is capped at the initial premium paid for the contracts.
At last check, NFLX is testing the waters in the $168.30 neighborhood, home to its ascending 60-day moving average. Over the past three months, the equity has outperformed the broader S&P 500 Index (SPX) by nearly 72 percentage points, but took a breather yesterday, which some analysts attribute to the aforementioned Icahn-related rumors.
Despite the stock's longer-term uptrend, though, Wall Street remains skeptical of Netflix, Inc. (NASDAQ:NFLX). The equity boasts just six "strong buy" endorsements, compared to 17 tepid "holds" and four "sell" or worse ratings. Plus, the consensus 12-month price target of $141.44 represents a serious discount to Netflix Inc.'s current price. Should the stock rebound off of trendline support, a flood of upbeat analyst attention could help the shares resume their quest for new highs.