Is It Time to Buy Netflix, Inc. (NFLX) Options?

Netflix, Inc. (NFLX) options are attractively priced as the stock rebounds off of support

Feb 22, 2016 at 1:55 PM
facebook X logo linkedin

Streaming media giant Netflix, Inc. (NASDAQ:NFLX) is trading 3.9% higher at $92.70 today, shrugging off a price-target cut to $130 from $140 at Goldman Sachs (which also weighed in on a slew of other Tech 2.0 stocks this morning). And as the stock powers higher, it looks like now might be an opportune time for options traders to jump on NFLX.

Looking at Netflix, Inc. from a technical standpoint, the stock appears to have plenty of upside potential. The shares have pulled back significantly from December's all-time high of $133.27 -- but NFLX is still up nearly 37% year-over-year. The stock is also in the process of rebounding off its 320-day moving average. Looking back, our quantified data indicates that two prior tests of this under-the-radar trendline have yielded an average 21-day return of 10.72% for NFLX shares.

Meanwhile, options traders have started to lean bearish on NFLX. At 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 0.97 is now higher than 78% of all readings from the past year. This indicates that traders have bought to open NFLX puts at a faster-than-usual pace relative to calls during the past couple of weeks.

Short sellers are also skeptical of NFLX, with shorted shares accounting for nearly 13% of the equity's available float. And 11 analysts currently rate the stock a "hold" or worse, leaving plenty of room for future upgrades, should NFLX continue to bounce from trendline support. An unwinding of negative sentiment among options traders, short sellers, or analysts could help the stock move higher in the days and weeks ahead.

For those looking to bet on another run higher from NFLX, now is a prime time to buy options. As of Friday's close, the stock's Schaeffer's Volatility Index (SVI) of 52% arrived in just the 28th percentile of its annual range -- meaning premiums for NFLX options should be relatively cheap. Plus, the stock boasts a Schaeffer's Volatility Scorecard (SVS) of 100 -- the highest possible reading -- indicating that Netflix, Inc. (NASDAQ:NFLX) shares have consistently exceeded the options market's volatility expectations over the past year.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical  levels, and top economic stories straight to your inbox.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI