Will Netflix Crash And Burn?

Netflix NFLX was brutalized Wednesday with the stock dropping over 4 percent.

This was the largest move for the stock in over a month.

Looking at the chart, you can see a clear downside break from the recent support levels. Notice also that NFLX had been consolidating in a relatively narrow range since mid-October.

The Bollinger Band width was the lowest it had been in 12 months and the stock was undoubtedly primed for big move. This is a stock that can typically have 4-5 percent moves in a day and not bat an eyelid.

Implied volatility has also been very low recently. If a trader was of the opinion that NFLX was heading lower they could look at trading a bear call spread on this former high flyer.

Date: November 20, 2014

Current Price:$363.50

Trade Details: NFLX Bear Call Spread

Buy 1 NFLX December 19^th $350 calls @ $7.60

Sell 1 NFLX December 19^th $340 call @ $4.80

Premium:$280 Total Net Debit

This is how the trade would look, with a maximum potential profit of $720 and a maximum loss of $280.