NFLX Analysis

Netflix Inc. (NFLX)

Update 6/16/2017: Tech stocks, NFLX among them, began a sharp decline the day after I entered into the position, rapidly carrying the price below the profit zone. With a week to go before expiration, I attempted to roll the position forward for a small premium in hopes of a partial recovery, but was unable to get a fill. I instead exited for a loss.

When I entered implied volatility had been rising for a month, coming off of a small pop to the downside after earnings were published, within a context of a price uptrend that had been running for nearly a year. There was no visible trigger for the decline, which hit much of the tech sector.

NFLX shares declined by 7.5% over eight days, or a -341% annual rate. The options position produced a -41% loss o debit for a -1,892% annual rate.

NFLX has sufficiently high implied volatility in relation to its most recent trend and in comparison to the VIX to support a trade.

I shall use options that trade for the last time 15 days hence, on June 23.

Implied volatility stands at 34%, which is 3.3 times the VIX, a measure of the volatility of the S&P 500 index.

NFLX’s IV stands in the 29th percentile of its annual range and the 87th percentile of its most recent broad movement.

The price used for analysis was $165.53.

Premium: $5.11 Expire OTM  
NFLX-iron fly Strike Odds Delta
Long 175.00 88.6% 12
Break-even 170.11
Short 165.00 48.2% 54
Short 165.00 51.9% 46
Break-even 160.11
Long 155.00 89.6% 10

The premium is 51% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered an order on NFLX as described above. The stock at the time of entry was priced at $165.36.

By Tim Bovee, Portland, Oregon, June 8, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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