Call Traders Blast Netflix Stock as Rally Continues

NFLX options remain attractively priced, to boot

Managing Editor
Aug 27, 2018 at 10:17 AM
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Netflix, Inc. (NASDAQ:NFLX) is continuing its recent rebound, with the FAANG stock up 3.9% to trade at $372.75. This may be in reaction to news the company is developing a system that would bypass the Apple app store. The feature would allow new users to register for the streaming service, but circumvent a commission fee Netflix has to pay Apple (AAPL) for any app-related transactions. 

Today's positive price action is just more of the same, with the stock fresh off its best week since Jan. 26 -- thanks to a bullish brokerage note. Prior to that, the shares had pulled back all the way to their 160-day moving average, a trendline that's had bullish implications in the past. Nevertheless, it still boasts a 94% lead in 2018.  

In the options pits, calls are already quite popular today. Over 77,000 calls have already changed hands, three times the average intraday pace and volume pacing in the 99th percentile of its annual range. Among the most active Netflix options so far are the weekly 8/31 370- and 375- strike calls, where it looks like new positions are being purchased. 

It's a prime time to buy premium on short-term NFLX options, too. The equity's Schaeffer's Volatility Index (SVI) of 32% registers in the 15th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations right now.

What's more, Netflix stock has consistently rewarded premium buyers over the past year. This is per the stock's Schaeffer's Volatility Scorecard (SVS), which is currently docked at an elevated 93 out of a possible 100. This suggests that NFLX has regularly made larger-than-expected moves on the charts, compared to what its options were pricing in.

 

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