Netflix, Inc. (NFLX) Options Players Roll the Dice On a Rebound

Netflix, Inc. (NFLX) stock is getting crushed after Alibaba Group Holding Ltd (BABA) dashed buyout hopes

by Alex Eppstein

Published on Aug 8, 2016 at 12:36 PM

Netflix, Inc. (NASDAQ:NFLX) has given back the bulk of its gains from Friday related to Alibaba Group Holding Ltd (NYSE:BABA) buyout rumors. The reason? BABA announced, "We are not preparing any investment into Netflix." Still, options traders today are rolling the dice on a rebound for the streaming entertainment stock.

According to Trade-Alert, traders are buying to open the weekly 8/12 95-, 96-, and 97-strike calls, anticipating NFLX will topple the respective strikes by this Friday's close, when the series expires. At last check, though, the stock was 2.7% lower at $94.42, extending its year-to-date deficit to 17.5%.

Bullish betting is business as usual in NFLX's options arena. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.67 calls for every put during the last two weeks -- a ratio that ranks just 4 percentage points from an annual high. What's more, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.79 sits south of 99% of all other readings from the prior year. Put simply, short-term open interest levels are far more call-focused than usual.

Outside of the options pits, it's more of a mixed picture. For instance, 17 analysts rate NFLX a "buy" or better, but nearly as many -- 15, to be specific -- consider the shares a "hold" or worse. Likewise, short interest plunged 12.2% during the last two reporting periods, yet 32 million shares remain sold short.

As alluded to, things haven't been pretty for Netflix, Inc. (NASDAQ:NFLX) in quite some time, and there are no guarantees the stock is preparing to burst higher, either. On the charts, the shares have been rejected by their 160-day moving average multiple times since late May, and haven't closed in triple-digit territory since early June.

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