Netflix Stock Gets "Bird Box" Boost, Could Soar in January

Netflix stock historically tends to outperform in January

Managing Editor
Dec 31, 2018 at 12:19 PM
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Netflix, Inc. (NASDAQ:NFLX) generated lots of buzz over the holidays, after its "Bird Box" film drew big streaming numbers and captivated the internet's attention. At last check, Netflix stock was up 2.5% to trade at $262.43 and could extend its rally into 2019, if history is any guide.

But first, the FAANG name's options activity is worth mentioning. Netflix is on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest options volume during the past 10 days, with names highlighted in yellow new to the list. In the last two weeks, nearly 545,000 calls have changed hands on NFLX, compared to about 505,000 puts.

MAO NFLX

However, looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows puts have been increasing in popularity in the last two weeks. NFLX stock's 10-day put/call volume ratio of 0.83 ranks in the 78th annual percentile. What this means is that although calls still outnumber puts on an absolute basis, the high percentile indicates a much healthier-than-usual appetite for bearish bets of late.

Echoing this, Netflix's Schaeffer's put/call open interest ratio (SOIR) of 1.14 sits in the 92nd percentile of its annual range, indicating that near-term traders have rarely been more put biased in the past 12 months. 

Drilling down on the front-month series, the January 2019 260-call saw the largest rise in open interest over the last two weeks. Data from the major options exchanges confirms a number of positions were bought to open, meaning traders expect the shares to keep rising in the coming weeks.

Whatever the motive, options traders will be pleased to know that FAANG stock has rewarded option buyers over the past year. The equity's Schaeffer's Volatility Scorecard (SVS) comes in at a lofty 96 out of a possible 100, meaning NFLX shares have handily exceeded options traders' volatility expectations in the past 12 months.

As alluded to above, options traders should also take solace in the fact that Netflix stock is one of the best stocks to own in January, historically. According to Schaeffer's Senior Quantitative Analyst Rocky White, going back 10 years, Netflix sports an average return of 21.4% in January, the best among the S&P 500 stocks. What's more, the equity has ended the month higher nine times out of 10. 

This is great news for a stock that has struggled on the charts amid the recent broad market sell-off. NFLX is heading towards a quarterly loss of nearly 30%, its worst since in seven years. For most of the three-month time frame, the shares have seen breakouts contained by their 30-day moving average. Overall, though, the stock still has gained 37% in 2018. 

 

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