After a year-long bear market, a nearly 20% decline since the beginning of the year, and a decline after four of the last four earnings reports, options traders are clearly bullish heading into this year. NetflixThursday’s earnings.
According to ThinkOrSwim data, the volume of calls for puts doubled in back-to-back sessions on Friday and Monday, and by midday Monday, the number of calls bought compared to puts had nearly tripled. At the same time, one of the most popular trades was selling puts at the money.
A technical image may be helpful. Netflix’s stock is trading at about $75, about the same level it was at when the company closed off its acquisition of Warner Bros. Discovery in February. It was around this level in late 2021 that Netflix began its 80% plunge, before recovering over the next few years and peaking at $134 last June.
“Netflix is currently testing the 200-week moving average rally and the previous $70 level, which was a breakout from resistance from late 2021,” Todd Gordon, founder and chief information officer at Inside Edge Capital, said in an email. “If this $70 technical support holds, it may be time to consider moving the channel back to NFLX.”
According to Cboe LiveVol data, option pricing currently suggests a post-earnings volatility of 7.6%, compared to an average realized volatility of 7.4% over the last year. Netflix stock has declined in four of the last four reports after increasing in three consecutive reports.
Media watchers have pointed to the lack of engagement as the company has yet to hit a major breakout hit last quarter. Netflix’s share of TV viewing is at its lowest level in more than a year, according to Nielsen.
Netflix, since the beginning of the year
“Netflix hasn’t had any blockbusters this year,” Rich Greenfield, TMT analyst and co-founder of Lightshed Partners, said in a text. “Nielsen statistics show engagement is up in the US, but the number of viewers per subscription is down slightly due to subscription growth. New users with ads are likely to have fewer views than older users without ads, so mix shifts and increased competition likely explain some of the reason.”
The most popular contract based on Monday’s volume was a 75-strike put expiring on Friday, thanks in part to one large seller who sold 500 of the puts for a profit of just under $150,000. Of Monday’s 20,000 trades in put contracts, 15,000 were likely sales, according to SpotGamma data.
