Netflix Call Options are now More Attractive that Ever

Netflix Inc. (NASDAQ:NFLX) is in the news for all the right reasons. The company has been making all the right moves, investors are happy, and the share price has been rising consistently. Some of the recent events supporting the bullish momentum are listed below:

  • Yesterday, news broke that Netflix was winning the streaming war in Australia.
  • Last Friday, a report from Oppenheimer suggests that Netflix will have 32% of broadband users in its service by 2020.
  • Last Thursday, Netflix revealed plans to start local shows to attract Japanese users.
  • Last Tuesday, the revamping of the user interface caused positive chatter among analysts on Wall Street.
  • On June 12, the firm announced that it was raising its UK HD package fees, a move that will increase revenue.
  • On June 10, Netflix announced that it would be seeking additional growth by focusing on Chinese and Spanish audiences.

Now, Netflix has made headlines again with the announcement of a 7-to-1 stock split. The 7-to-1 stock split means that current Netflix shareholders will now have 7 shares of the stock for every one share that they had. The additional shares are payable on July 14 and they are available to all investors who have bought the shares as at market close to July2.

The news is already causing the share price of Netflix to soar; and by implication, the NFLX call options that I recommended is recording a strong rally. The shares of Netflix closed with gains of 0.9% yesterday to close at $681.19. After the announcement of the split, the stock gained 2.6% in pre-market trading to lead to an opening price of $700.50 in today’s session. The stock has already reached another lifetime high of $706.24 in this morning session.

Performance in Three Days

Netflix can’t just seem to be out of my radar despite three coverages in the last one week. Last Friday, I wrote a weekend options round up of options contracts that I recommended in the previous week. Netflix options was one of the contracts that I revisited in that Friday piece. In last Friday’s piece, I recommended that you buy the NFLX Dec 2015 650.000 call (NFLX151218C00650000) at an asking of $67.66.

As at 10:36AM EDT today, the NFLX Dec 2015 650.000 call (NFLX151218C00650000)was trading up with gains of 12.87% at $98.20. More impressive is the fact that the stock now commands an asking price of $105.30. In essence, that contract has gained 55.63% in the last three trading sessions. That’s not bad if you ask me.

NFLX Stock Split is Good for Option Traders

The stock split now makes the shares of Netflix more affordable to retail investors. By implication, the options of Netflix will now be cheaper. Hence, we can expect more buying interest in NFLX options going forward.

I am still bullish on Netflix and I recommend staying long on the contract. If you have bought the NFLX Dec 2015 650.000 call (NFLX151218C00650000), stay in the game and lock in your gains with stop/limit loss orders. You can still buy the contract if you are not overwhelmed by the $100 asking price. Traders with shallower pockets might want to consider buying the NFLX Jan 2016 960.000 call (NFLX160115C00960000) at an asking price of $14.50 for a grab and dash trade.

 

— Daily Option Alerts

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