$NFLX trade for earnings

  

21 oct 

interesting if you read my entry from below.. get me thinking about something that i will share at the end. compare this chart to the one at the bottom and my commentary. over the course of a couple days the stock pulled back from 570ish to 525ish prior to earnings. monday of this week i entered a 520/500 put 1x2 ratio for slight credit with stock at 536. stock went down another 10points after and i ended up closing the ratio right before closing on tuesday. was still positive but not the point. i have a rule that my gut feeling over rules any strategy or trade i have and i got an odd feeling that the ratio was too tight (a 20point spread/40point wide profit range) as in it might go lower than 480

turns out i got the direction correct and could have exited at $5.00ish in the first 30min today and stock closed at 489ish today. no regrets , but instead after the selloff and in the 490s i sold a Nov06 short put at the 455 level at $5.00 credit. the strategy i had in the first note was to stay at or below the 460ish low from end of september. so im proud of myself for sticking to the levels.

secondly, rereading my post below gets me thinking.. the levels i was looking at for the put ratio ..the 500/475 would have been pretty good for the actual move. the spread is wider at 25points and 50point profit range. gets me thinking that maybe instead of waiting until the day of or day prior to the earnings AND THEN putting on the trade to instead in order to utilize the added time premium to put the trade on week or so earlier to get that wider profit range. wider profit range might keep me from getting shaken out. can always close it out and or adjust the strikes if its significantly different. something to think about

so now my only netflix position is 

Short Put Nov06 455 strike at $5.00 credit, was about 18delta, 16days to opex . target profit of 50%

10 oct 

earnings are still 10 days away, i will revise the strike levels to where the stock is trading the day prior but this is the idea. a couple of you that follow my trades have seen me do call ratio spreads. buying 1 call and selling 2 calls at a higher strike for near zero or slight credit. that being on top of existing long Jan2022 calls. the call ratios have a high probability of success. for netflix i have alerts set for the stock way lower and an on the lookout to get back long via Jan2022 long calls deep in the money. the 400 strike would be where i would look first. ive also been occasionally selling short puts on days where the stock sells off. the target level for a potential put sale would be at/below the 460ish level but granted thats a long way off and with earnings on oct 20 it limits which opexs i can choose from.

so the setup is, and i dont have any special insight, that the stock pulls back after earnings. sells off on great numbers, the child porn movie, subs growth.. whatever. , im hoping for a selloff so i can either go long via Leaps or via short put sales so a trade setup to profit on that selloff but also not outlay alot of money for the trade. under $1.00 ideal.

i mentioned the call ratio spreads.. this is a Put ratio spread... using after hours pricing on 10oct with stock at 540. the expected earnings move is about $55 (add the at the money 540 put and call together gets you the expected move). so a downside expected move is about 485. the trade is:

buy a Oct23 500 put at $10.75 and sell two Oct23 475 puts at about $5.25 each. whole thing cost under $1.00 debit. profit range at Oct23 opex is 500-450 with max of $2500 with a magical pin at 475. getting about 50-60% of the max profit has been a consistent exit for me. not a free trade. you are buying a 500/475 put spread and then selling an additional 475 put. so that additional put will require margin or be cash secured.

point of the trade is that if im going to get the pullback im hoping for in order to go long i might as well make some money on that selloff. off course stock could blow thru the bottom range or go up. the consensus online seems positive on the stock and future. 

etrade show earnings after hours on the 20th so best case i put this on the same day and revise the strikes to where the stock is at that time. the profits wont kick in right away even if a down move and might show a mark to market loss because the two short puts have to decay enough so be prepared to wait until opex friday to see the biggest gains. the bid/ask will be bouncing around as usual but will try to get for as close to zero or slight credit. no more than $1.00 debit though

will tweet if i enter