Netflix, Inc. (NFLX) Rally Inspires Confident Options Bettor

A credit spread is being initiated at Netflix, Inc.'s (NFLX) June 75 and 85 puts

by Alex Eppstein

Published on May 23, 2016 at 11:48 AM
Updated on Jun 24, 2020 at 10:16 AM

Netflix, Inc. (NASDAQ:NFLX) put options have been popular lately. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders have bought to open 1.16 puts for every call during the last two weeks. The resultant put/call volume ratio is just 2 percentage points from an annual peak.

In today's trading, put options are crossing at 1.3 times the average intraday pace -- however, not all of this activity is the result of bearish wagering. Among the most active strikes are the June 75 and 85 puts, where it looks like one trader initiated a credit spread for an initial net credit of $0.41 apiece. In other words, by selling to open June 85 puts, the speculator expects NFLX to remain above the strike through front-month expiration, at the close on Friday, June 17. However, by buying to open June 75 puts, the trader has limited potential losses, in the event the underlying stock breaches the sold strike.

Based on what's happening on the charts today, it's unsurprising to see someone express confidence toward NFLX. At last check, the streaming content stock is 2.8% higher at $95.07 -- although there's no clear catalyst behind the bounce.

From a longer-term perspective, the shares don't exactly inspire confidence. Since touching its most recent high of $111.85 in mid-April, Netflix, Inc. (NASDAQ:NFLX) has tumbled 15%. On a comparative-strength basis, the stock has underperformed the broader S&P 500 Index (SPX) by nearly 10 percentage points over the past two months -- earning it some negative analyst attention in the process.

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