Puts Pop as Netflix Pulls Back After Disney Bundle Unveiling

Disney's new streaming bundle is a direct competitor to Netflix

Managing Editor
Aug 7, 2019 at 2:42 PM
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Perhaps the only good that's come out of Walt Disney's (DIS) dismal earnings report was the announcement of its new streaming bundle, where Disney Plus, Hulu, and ESPN Plus can be had for $12.99 a month, starting Nov. 12. This feature -- which is the same price as Netflix's most popular subscription plan -- has put a dent in streaming giant Netflix, Inc. (NASDAQ:NFLX), sending the stock down 2.5% to trade at $302.44, with options traders coming out to target more short-term losses.

More specifically, NFLX has seen almost 90,000 put options change hands today, with volume pacing for the 90th percentile of its annual range. Most active is the weekly 8/9 300- and 290-strike puts, where new positions are being opened. This indicates options buyers are betting on continued struggles from the FAANG stock in the coming days, before the options expire this Friday, Aug. 9. 

This reflects a growing trend seen in Netflix's options pits lately. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NFLX's 10-day put/call volume ratio of 0.84 ranks in the 83rd percentile of its annual range. While this shows long calls have still outnumbered puts on an absolute basis, it indicates the rate of put buying relative to call buying has been accelerated the past two weeks.

Regardless of direction, traders looking to speculate on the security's near-term momentum should consider options. NFLX's Schaeffer's Volatility Index (SVI) of 40% is in just the 19th percentile of its annual range. In simpler terms, short-term options are pricing in relatively tame volatility expectations for Netflix at the moment.

On the charts, Netflix stock earlier traded at its lowest point since early January. The shares still hold a 13.6% lead in 2019, but have shed 17% this quarter. July was NFLX's worst month since October, after the company reported a bigger-than-expected subscriber loss, but the equity remains a ways off from its Dec. 26 bottom of $231.23.

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