$Netflix, Inc. $NFLX) Shares of Netflix, Inc. (NF
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Posted On: 05/10/2017 3:18:46 PM
$Netflix, Inc. $NFLX)
Shares of Netflix, Inc. (NFLX) fell 2.64% immediately following the company's latest earnings report. The bad news is: Netflix remains rangebound through a multimonth lens. The good news is: A drop in implied volatility has given investors and traders better odds of making in NFLX stock than they've had in months.
Netflix earnings for the first quarter came to 40 cents per share, which was 3 cents better than analyst expectations. On the top line, sales of $2.64 billion were right on par with estimates. However, user growth is a more important metric for a growth company like Netflix. In that vein, some analysts expressed concern over a somewhat softer international user growth number, which has been the focus of many analysts for roughly two years. Additionally, NFLX said it might be cash flow-negative for years to come as it continues to foray into new movies and shows.
That's not exactly screamingly positive news. But then again, Serge doesn't think it's a reason to jump ship, either. Especially considering Netflix provided better-than-expected guidance for Q2 subscriber adds.
Note that the intraday selloff was mitigated by day's end as buyers stepped in and defended the stock. Either that, or sellers simply became exhausted.
Netflix stock clearly remains rangebound, and on the long side, pure stock traders will likely want to wait for a breakout above $147 before committing better capital on the long side.
However, the options market may allow a different opportunity.
At the bottom of the daily chart, note that Netflix's implied volatility dropped after Tuesday's earnings report, making directional options bets the cheapest they've been since February. So while NFLX stock remains rangebound, options traders could take advantage of the low-priced environment to position for an eventual break higher and out of the range.
June or even August at-the-money call spreads would make sense here. Serge does think a trade like this would be best done in small sizes until a breakout occurs.
And for downside protection, any break below the trading range would be a last-resort stop-loss.
Shares of Netflix, Inc. (NFLX) fell 2.64% immediately following the company's latest earnings report. The bad news is: Netflix remains rangebound through a multimonth lens. The good news is: A drop in implied volatility has given investors and traders better odds of making in NFLX stock than they've had in months.
Netflix earnings for the first quarter came to 40 cents per share, which was 3 cents better than analyst expectations. On the top line, sales of $2.64 billion were right on par with estimates. However, user growth is a more important metric for a growth company like Netflix. In that vein, some analysts expressed concern over a somewhat softer international user growth number, which has been the focus of many analysts for roughly two years. Additionally, NFLX said it might be cash flow-negative for years to come as it continues to foray into new movies and shows.
That's not exactly screamingly positive news. But then again, Serge doesn't think it's a reason to jump ship, either. Especially considering Netflix provided better-than-expected guidance for Q2 subscriber adds.
Note that the intraday selloff was mitigated by day's end as buyers stepped in and defended the stock. Either that, or sellers simply became exhausted.
Netflix stock clearly remains rangebound, and on the long side, pure stock traders will likely want to wait for a breakout above $147 before committing better capital on the long side.
However, the options market may allow a different opportunity.
At the bottom of the daily chart, note that Netflix's implied volatility dropped after Tuesday's earnings report, making directional options bets the cheapest they've been since February. So while NFLX stock remains rangebound, options traders could take advantage of the low-priced environment to position for an eventual break higher and out of the range.
June or even August at-the-money call spreads would make sense here. Serge does think a trade like this would be best done in small sizes until a breakout occurs.
And for downside protection, any break below the trading range would be a last-resort stop-loss.
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