Earnings Preview: Netflix, Inc. (NFLX)

Netflix, Inc. (NFLX) will report third-quarter earnings after tonight's close

Oct 17, 2016 at 10:51 AM
facebook X logo linkedin

Streaming media giant Netflix, Inc. (NASDAQ:NFLX) is due to report its third-quarter earnings after the close this evening. Ahead of tonight's quarterly earnings report, NFLX stock is 2.5% lower at $98.89. And although recent history suggests the stock could be poised to extend these losses in tomorrow's post-earnings trading, options traders have taken the glass-half-full approach to NFLX of late.

Over the past 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have purchased 369,320 NFLX calls, compared to 252,685 puts. The resulting call/put volume ratio of 1.46 ranks just 5 percentage points from an annual high, indicating calls have been bought to open over puts at a faster-than-usual clip.

Drilling down on more recent activity, call buyers have still dominated the stock's options pits. For instance, NFLX's October 110 call saw the largest rise in open interest over the last two weeks -- with 8,814 contracts added -- and data from the major exchanges confirms the bulk of the action was of the buy-to-open variety.

However, the company’s recent post-earnings history is far from encouraging. NFLX stock has made a move to the downside in the session following earnings in each of the last four quarters. And the shares have tended to make some volatile moves, too. The average single-day swing -- regardless of direction -- in the session subsequent to earnings over the past two years comes in at 13.4%. As of now, the options market is pricing in an even wider 16.5% move for Tuesday's trading.

From a technical standpoint, this year has been something of a mixed bag for Netflix, Inc. (NASDAQ:NFLX). The shares are off 13.5% in 2016, and have yet to close their late April earnings-induced bear gap. And while the stock has outperformed the broader S&P 500 Index (SPX) by more than 20 percentage points over the last three months, today's slip has NFLX below the historically significant $100 level. Plus, the stock is testing its 30-day moving average -- a trendline that has served mostly as support since a late-July earnings-related plunge.

NFLX Daily Chart October 17

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!


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 C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI