Archives

Netflix (NFLX) Trade Alert

By Jeff Brown on March 13, 2017

Action to Take:

Sell to Open the NFLX April 21, 2017 $130 put

Buy to Open the NFLX April 21, 2017 $125 put

For a net credit of $0.90 or more

Profit Potential:

Max capital at risk per spread: $500 – $90 = $410

Return on capital at risk: $90/($500 – $90) = 22%

Days to expiration: 39

Trade Thesis:

I suspect most of you are familiar with Netflix, the blue-chip technology stock that started its business renting and distributing DVDs via U.S. mail.

Today, that business is quite different. Instead of DVDs, everything is streamed over the internet directly to your home. In fact, I just read an article that said more people have access to Netflix today than they do to a digital video recorder (DVR). With most video content on demand, there is little need for recording.

Netflix’s growth has been extraordinary. The chart below shows Netflix’s total subscriber growth. In 2016, Netflix reached about 50 million U.S. subscribers. But what is more impressive is its rapid international growth… which has become 47% of its total subscriber base.

On the back of this strong growth, Netflix jumped from a trading level of around $130 to a new floor of around $140 in mid-January this year.

I expect subscriber growth will continue in 2017. This strength gives us a chance to put on a bull put spread with a great return. We are able to put on the $130/$125 bull put spread for about $90 per credit spread… resulting in an incredible 22% return on capital at risk in only 39 days. This is too good to pass up for April expiration credit spread trades.

Regards,

Jeff Brown
Editor, Four Point Trader

©  Bonner & Partners, 55 NE 5th Avenue Suite 100, Delray Beach, FL 33483, USA. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from the publisher.

Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not designed to meet your personal financial situation – we are not investment advisors nor do we give personalized investment advice. The opinions expressed herein are those of the publisher and are subject to change without notice. It may become outdated and there is no obligation to update any such information.

Investments recommended in our publications should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. You shouldn't make any financial decision based solely on what you read here. 

Bonner & Partners writers and publications do not take compensation in any form for covering those securities or commodities.

Bonner & Partners expressly forbids its writers from owning or having a financial interest in any security that they recommend to their readers. Furthermore, all other employees and agents of Bonner & Partners and its affiliate companies must wait 24 hours before following an initial recommendation published on the Internet, or 72 hours after a printed publication is mailed.