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The shares of Netflix, Inc. (NASDAQ:NFLX - 174.74) notched their loftiest settlement since September 2011 yesterday, and option traders are betting on even more upside for the streaming video concern. During the course of the session, NFLX saw roughly 62,000 calls change hands -- a 33% mark-up to its average daily call volume. For comparison, about 45,000 puts traded, slightly below the norm.
Most popular were the weekly 2/8 175- and 180-strike calls, which saw around 5,600 and 5,200 contracts cross the tape, respectively. The majority of the calls traded at the ask price, and open interest soared at both strikes overnight, pointing to newly bought bullish bets.
Digging even deeper, the 175-strike calls changed hands at a volume-weighted average price (VWAP) of $4.16, meaning the buyers will make money if NFLX topples the $179.16 level (strike plus premium paid) by Friday's closing bell, when the weekly options expire. Meanwhile, the VWAP of the 180-strike calls was $2.94, indicating a breakeven of $182.94 for the buyers. However, even if NFLX takes a breather the rest of the week, the most the speculators can lose is the initial premium paid for the calls.
Technically speaking, NFLX is up about 69% since reporting earnings a couple of weeks ago, bringing its Relative Strength Index to 82 -- in overbought territory. In fact, the shares have outperformed the broader S&P 500 Index (SPX) by a whopping 109 percentage points during the past three months.
However, despite the stock's technical prowess, yesterday's affinity for bullish bets runs counter to the growing trend. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 1.18 ranks in the 81st percentile of its annual range. Or, in simpler terms, option buyers are picking up NFLX puts over calls at a faster-than-usual pace -- likely either to gamble on a pullback, or to protect their uptrending shares.