Netflix, Inc. (NFLX) Put Buyers Bet On a Bigger Pullback

Netflix, Inc. (NASDAQ:NFLX) came within striking distance of a fresh all-time high earlier, but was last seen lower

by Karee Venema

Published on May 21, 2015 at 1:17 PM
Updated on Jun 24, 2020 at 10:16 AM

Similar to the broader equities market, Netflix, Inc. (NASDAQ:NFLX) is waffling around record highs, despite an upbeat outlook from Citigroup and a shout out from CNBC's Jim Cramer. At last check, the shares were off 0.2% at $620.51 -- after earlier being within striking distance of a new all-time peak. In the options pits, each of the stock's 10 most active strikes reside in the weekly 5/22 series, with a number of speculators gambling on a steeper retreat through tomorrow's close.

Specifically, the equity's weekly 5/22 620-strike put has seen the most action, and it looks as if new positions are being purchased for a volume-weighted average price (VWAP) of $3.27. In other words, speculators will profit if NFLX breaches the breakeven price of $616.73 (strike less VWAP) by week's end.

Widening the sentiment scope reveals it's been NFLX call buyers who have been busy in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 1.15 rests in the 82nd percentile of its annual range.

Regardless, those purchasing NFLX's short-term options are doing so at a relative bargan. In fact, the equity's Schaeffer's Volatility Index (SVI) of 27% sits lower than 91% of similar readings taken in the past year, and its 30-day at-the-money implied volatility of 26.7% is docked in the 16th annual percentile. In other words, premium on the stock's near-term options is pricing in relatively low volatility expectations at the moment.

On the charts, Netflix, Inc. (NASDAQ:NFLX) has been a force to be reckoned with this year, up 81.5%. As touched upon, Citigroup thinks there's more room to run. While not as bold as Pivotal Research's price-target hike earlier this week, the brokerage firm upped its target price to $722 -- representing expected upside of 16.4% to current trading levels, and a move into never-before-seen territory.

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