Weekly Options Traders Target Netflix, Inc. and Alphabet Inc

Netflix, Inc. (NFLX) and Alphabet Inc (GOOGL) are still offering near-term options at a relative bargain

Nov 30, 2016 at 3:24 PM
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Over the past few weeks, we've been keeping an extra close eye on "FANG" stocks, as the four securities all pulled back from recent highs following this month's election results in the U.S. And these popular names have continued to offer near-term options at a relative bargain, while staying atop key levels of technical support. Today, we're checking back in on Netflix, Inc. (NASDAQ:NFLX) and Alphabet Inc (NASDAQ:GOOGL), where options in the weekly 12/2 series are especially hot.

Starting with NFLX, the shares are 0.4% lower at $117.10, after the company announced it will now allow some shows and movies to be downloaded for offline viewing. The stock is still in positive year-to-date territory, and has been holding comfortably above its 40-day moving average since September. Just over half of the analysts tracking NFLX seem to be in its bullish corner, but plenty of room for upgrades remain -- with 14 brokerage firms sitting on ratings of a "hold" or worse.

Taking a look at the stock's options pits reveals near-term traders have been unusually put-heavy toward NFLX, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.01 -- higher than 78% of the past year's readings. Meanwhile, it remains an attractive time to purchase short-term options, as the security's Schaeffer's Volatility Index (SVI) of 29% is seated in the low 7th percentile of its annual range -- meaning premium is pricing in low volatility expectations at the moment.

Today, NFLX options are changing hands at roughly the expected intraday rate, with the weekly 12/2 series dominating the action. In fact, the stock's 10 most active options all reside in this weekly series. In the lead is the 120-strike call, where it appears a mix of buy- and sell-to-open action is taking place. Buyers of the call are betting on Netflix, Inc. to rally above the $120 mark before the close this Friday, when the option expires, while sellers are looking for the round-number level to serve as a short-term ceiling for the shares.

GOOGL is slumping today, last seen off 1.5% at $777.82, amid reports that more than one million Google user accounts have been compromised due to downloads of malicious software on Android devices. Still, GOOGL stock is trading above support at its 160-day moving average, as well as the $775 level, which is near its year-to-date breakeven mark. The security remains surrounded with optimism from Wall Street, as 93% of following brokerages maintain a "buy" or better rating. Plus, short interest represents a mere 0.5% of GOOGL's available float.

There seems to be a fair amount of pessimism among options players, however. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GOOGL's 10-day put/call volume ratio of 0.90 ranks in the 94th annual percentile. That said, it’s possible some shareholders have been picking up puts to protect against another pullback. Near-term options buyers are also scoring a bargain with GOOGL, as the stock's SVI of 18% rests within the bottom 1% of all readings taken in the past 12 months.

GOOGL calls are slightly accelerated this afternoon, and options traders are busy targeting short-term bets. Specifically, eight of the stock's 10 most popular options belong to the weekly 12/2 series. Most active are the 800- and 790-strike calls, with a mix of buying and selling spotted at each. While call sellers are looking for Alphabet Inc (NASDAQ:GOOGL) to stay put or slide lower, call buyers are hoping the shares can manage a weekly close above the respective strike prices -- a feat the stock hasn't managed since late October.

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