Wasu Talks Excite Netflix, Inc. (NFLX) Bulls

Netflix, Inc. (NFLX) appears to be one step closer to entering the Chinese online media market

May 18, 2015 at 1:48 PM
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Netflix, Inc. (NASDAQ:NFLX) jumped to a record high of $619.25 earlier, and was last seen up 0.3% at $615.14. Propelling the shares are reports the streaming content provider has had discussions with Wasu Media Holding Co. about entering the Chinese market -- confirming earlier speculation. Meanwhile, weekly NFLX options are extremely popular, as each of the stock's 10 most active strikes will expire at this Friday's close.

Digging deeper, the weekly 5/22 630-strike call is among several NFLX options seeing buy-to-open action. By initiating these out-of-the-money positions, speculators think the shares will extend their gains and settle atop $630 by week's end -- when the series expires -- notching new record highs along the way. Delta on the option is just 0.22, though, suggesting a roughly 1-in-5 chance the contract will be in the money at expiration.

Taking a step back, NFLX calls have been in high demand recently. During the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has racked up a call/put volume ratio of 1.16 -- higher than all but 15% of comparable readings taken in the past year.

Analysts are similarly bullish. Nineteen of 29 brokerage firms tracking Netflix, Inc. (NASDAQ:NFLX) have designated it a "buy" or better, compared to nine "holds" and just one "strong sell." However, the stock's average 12-month price target of $574.05 stands at a discount to current trading levels, so a round of upward price-target revisions may be in order.

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