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Netflix, Inc. (NASDAQ:NFLX) was hammered with attention from call players on Monday, as roughly 58,000 of these contracts crossed the tape during the course of the session. This was almost double the norm, and 10,000 more than the number of puts exchanged. A closer look at the data reveals that two groups of traders are eyeing the $300 mark this week, albeit with different outcomes in mind.
Most popular was the weekly 8/30 300-strike call, where 5,873 contracts changed hands at a volume-weighted average price (VWAP) of $1.15. Meanwhile, open interest surged at this strike overnight, signaling the initiation of new positions. According to Trade-Alert, a portion of the volume traded at both the ask and bid prices, while data from the International Securities Exchange (ISE) confirms a mix of buy- and sell-to-open activity, respectively.
In order for the call buyers to secure a profit, NFLX must ascend past breakeven at $301.15 (strike price plus the VWAP) by this Friday's close. This denotes a premium of 7.8% to the stock's current perch at $279.34, as well as new-high territory. At last check, the delta for this option was docked at 0.092, meaning it has just under a 1-in-10 chance of finishing in the money. Still, even if the equity remains south of the strike level, the most Monday's call buyers stand to lose is the initial cash outlay.
Elsewhere, the call sellers are counting on NFLX to remain south of $300 throughout the rest of the week. This would render the options worthless, and allow them to pocket the initial premium collected, which also represents the maximum profit on the play. Should the stock conquer the strike price, however, the traders may be forced to deliver the shares at $300 apiece, no matter how high NFLX climbs. This activity could also be reflective of a covered-call strategy, in which case the speculators are actually shareholders looking to generate some extra income, or perhaps pick up some modest downside protection.
From a technical standpoint, Netflix, Inc. (NASDAQ:NFLX) has been knocking it out of the park, having tripled in value so far this year, and skyrocketing by close to 350% during the last 12 months. What's more, the shares have outperformed the broader S&P 500 Index (SPX) by north of 26 percentage points during the most recent 60-day time frame.