Yikes! Netflix just can’t stay out of the news. At least today it was a good announcement about their expansion into the UK. By now it is no surprise that Netflix has taking a bad bounce and dropped over half of its value. Since then it has been a rollercoaster ride only touched by the gutsy speculators.
Today I noticed a trade to be made in NFLX as it began to pullback and consolidate on an intraday level. The play was a short put on the weekly options. The short put will allow us to take advantage of NFLX moving higher but also not hurt us if it were to stay flat or even drop a bit.
The puts we were looking at are on the 75 strike for a .15 ($15) credit. This would yield a 2.00% return on investment for a 4-5 day hold.
The position was put on when NFLX was trading at 89. At the close of today it is at 98 so we are moving in the right direction.
Going forward this week we will have several options on handling this position. Ideally we want NFLX to rise and remain above 75. This will allow our position to expire worthless which allows us to keep the full credit and not pay for commissions. If NFLX decides to stop at some point we will have to decide to roll our position out to next week or close it out completely. We will choose to close out completely since rolling out weeklys is a headache and not worth the trouble.
We will continue to monitor and update this position for the rest of the week.