Netflix (NFLX) Is Still A Play

Netflix, Inc. Credit Spread (NASDAQ: NFLX)

TheOptionPlayer.com sets up a Netflix (NFLX) short-term (8-day) option strategy. Investors could simultaneously:

Sell the November week-five expiration NFLX $365 call for $1.33

AND

Buy the $370 call at $.80

The difference between funds received and paid out is a $.53 per share credit which we keep if Netflix stock closes below $365 on Friday November 29^th, but immediately exit the position if it appears the price will end up higher. Another suggestion is if the price gaps up open the trade using higher strike prices. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.

Why we recommend it:

No doubt regular readers have noted a series of successful (NasdaqGS: NFLX) trades over the past few months. Basically, we are following a version the popular investing concept to "let your profits ride". The Netflix chart below is aligned the same as presented in last week's trade and you can easily see the stock has remained effectively confined to a trading range the past six weeks or so. The only violation of the trading range occurred during brief price volatility surrounding Netflix 3^rd quarter earnings announcement (which we warned ahead of time).

Netflix shares got a nice boost today following news articles explaining how company market share is booming at the expense of cable companies. Today's price surge moved the stock back to the upper level of the trading range, but the upper resistance level should continue to hold as another financial report pointed out Netflix valuation is approaching nosebleed levels. All trends change and eventually Netflix shares will trend up or down to break out of the current range-bound trend. The strategy is to continue profiting from the opportunity by taking advantage of current Netflix price action until the trend changes. Similar to last week, the momentum indicators in the chart below are maintaining a neutral trend as we bet Netflix, Inc. stock will continue to trade below the $365 target during the short holiday week.

52-Week High: $389.16

52-Week Low: $74.50

Average Volume (3 month):   3,620,760