-company reports their Q2 earnings tonight after the close.
-options market implying about a 10% move which looks a little cheap to the ~13.5% average move of the last 8 quarterly reports.
– stock is down about 8% from the all time highs made earlier in the month that followed the company’s subscription price hikes.
-Technically, when you look at the chart below, there is a very interesting pattern that emerges……6x this year prior to the recent sell off from an all time high, the stock bases, makes new high sells off and then does it all over again.[caption id="attachment_3458" align="aligncenter" width="300" caption="1 Yr NFLX chart provided by Bloomberg LP"][/caption]
This appears to me to be a very trade-able pattern if you look for ways to define your risk…….As readers of this site know I am not a fan of this company or their products and feel that at some point in the next 10 years they will go the way of blockbuster. But if you have any reason to be bullish and think that this pattern persists than now is as good of time as any.
MY VIEW: going against my better judgement to avoid the name I want to make small defined bet into earnings that the company changed subscriptions because they “NEED” to, due to growing competitive threats. I am going to Use July 29th weekly options and buy the move. But I am going to pick a direction and that is down. I am playing for a move back to 255, which is about 9%/
TRADE: NFLX $282 Buy July 29th 265/255/245 Put Fly for 1.10
-Buy 1 NFLX July 29 265 Put for 6.57
-Sell 2 NFLX july29 255 Puts at 7.14 (3.57 each)
-Buy 1 NFLX July29 245 Puts for 1.57
Break-Even this Friday Weekly Expiration:
Above 265 lose 1.10 in premium, btwn 263.90 and 255 make up to 8.90, at 255, make full 8.90…..
Btwn 255 and 245 pay out trails off and below 245 lose 1.10 in premium.
RISK WHAT YOU ARE WILLING TO LOSE, IF YOU GET THE DIRECTION AND THE MAGNITUDE WRONG YOU WILL NOT BE ABLE TO SALVAGE ANY PREMIUM DUE TO HIGH EXECUTION COSTS AND SHORT DURATION.