Netflix, Inc. (NFLX) Traders Take Aim at End-of-Week Upside

Netflix, Inc. (NFLX) is running up the charts today, and option traders anticipate extended gains

by Alex Eppstein

Published on Nov 16, 2015 at 2:16 PM

Amid recent buzz surrounding consumer-discretionary stocks, streaming giant Netflix, Inc. (NASDAQ:NFLX) is proving the pundits right -- up 5.2% at $109.04. In fact, the shares have more than doubled on a year-to-date basis. Today's jump has option traders out in force, especially on the call side of the aisle.

Taking a quick step back, call buying has been the strategy of choice among speculators in recent weeks. Specifically, across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NFLX has amassed a 10-day call/put volume ratio of 1.68 -- just 2 percentage points from a 12-month peak. In other words, traders have rarely bought to open calls over puts at a faster rate, looking back one year.

In today's trading, NFLX calls outnumber puts 58,000 contracts to 38,000. Drilling deeper, the most active strike is the November 110 call, which option players are buying to open. In short, these bettors think the stock will topple the $110 level directly overhead by Friday's closing bell, when front-month options expire. If this fails to happen, the traders can rest easing knowing the most they have on the line is the initial premium paid.

On a related note, Netflix, Inc.'s (NASDAQ:NFLX) Schaeffer's Volatility Scorecard (SVS) comes in at 98. This indicates the stock has tended to make outsized moves during the prior year, relative to what the options market has priced in.

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