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To say that streaming content provider Netflix, Inc. (NASDAQ:NFLX - 181.81) has been a broad-market standout would be an understatement. The company recently blew earnings expectations out of the water, and new research shows the number of U.S. subscribers is up 20% from a year ago. Still, just one-quarter of domestic households subscribe to Netflix, pointing to a vast untapped market.
On the charts, meanwhile, the shares of NFLX have nearly doubled in 2013, outperforming the broader S&P 500 Index (SPX) by nearly 113 percentage points during the past three months. In fact, the equity tagged a new annual high of $188.88 earlier this week, yet Wall Street remains wary. From a contrarian perspective, this combination of solid price action and lingering skepticism suggests NFLX could have room to run.
In the options arena, traders have been snatching up puts over calls at a slightly accelerated clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.96 stands higher than 62% of all other readings of the past year.
In the same skeptical vein, the security's Schaeffer's put/call open interest ratio (SOIR) stands at 1.70, indicating that puts nearly double calls among options with a shelf-life of three months or less. Even more telling, perhaps, this ratio sits just 2 percentage points shy of a 52-week acme. Or, in simpler terms, near-term options traders have rarely been more put-heavy during the past year. Going forward, an unwinding of these bearish bets could translate into a contrarian boon for NFLX.
Elsewhere, NFLX's stellar late-January trip into the earnings confessional sent shorts scrambling for cover, with short interest depleting by 23% during the past two weeks. Nevertheless, there are plenty of skeptics who've remained on the sidelines, as short interest still accounts for nearly 21% of the equity's total available float. Should the bearish holdouts abandon ship, NFLX could ride the short-squeeze tailwinds.
Traders expecting NFLX to power even higher should consider buying the stock's in-the-money April 160 calls, which were last asked at $30.65. What's more, the equity's Schaeffer's Volatility Scorecard (SVS) of 99 indicates that NFLX options are relatively inexpensive, compared to the probability of an outsized move on the charts, suggesting now is an opportune time to gamble with options.