Options Traders Target Record Highs for Netflix Stock

It looks like a good time to target NFLX options, particularly calls

Aug 28, 2017 at 11:35 AM
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On Friday, we noted a potentially bullish setup for Netflix, Inc. (NASDAQ:NFLX), with the shares trading just above their 50-day moving average. Plus, it's a good time to target near-term options, based off the fact that NFLX's Schaeffer's Volatility Index (SVI) of 27% ranks in just the 11th annual percentile -- signaling lower-than-usual volatility expectations.

Additionally, the stock's 30-day at-the-money implied volatility skew of 8.5% ranks in the 95th annual percentile, suggesting calls have rarely been cheaper relative to puts over the past year. It would appear options traders have recognized this prime trading opportunity, since calls are trading at an accelerated pace today. 

Specifically, more than 20,000 calls have crossed so far, compared to just around 11,000 puts. The weekly 9/1 series is popular, with traders targeting the 167.50-, 170-, and 172.50-strike calls.

But the most interesting activity is at the October 200 call, where data points to buy-to-open action. If this is the case, traders are betting on Netflix stock rallying above $200 within the next two months -- a more than 19% premium to its current perch near $167.98. It's likely not a coincidence the company is tentatively scheduled to report earnings in mid-October, and Netflix stock surged 13.5% following the company's late July results. 

More broadly, put buying has been picking up the pace in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.70 ranks in the 72nd annual percentile. Considering NFLX has pulled back from its July 21 record high of $191.50, some of this recent activity may be a result of shareholders picking up protective puts

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