We even did a flash poll at the office the other day, and no one was rushing to cancel his or her Netflix subscriptions. Out of 35 people, not one is grinding an axe — all are delighted to keep their movie queues full.
But here we sit — with the temperature on this stock gone cold. Call it the cherry on top of the sundae of carnage and bad breaks.
It’s overblown … and it’s just broken the scale.
But … could a comeback already be coming around?
Make Guaranteed Gains from Netflix – Right Now!
Here’s a strategy I’m putting to work that will take advantage of a volatile, opinionated stock in the short- to medium-term, yet will probably gain some upside over time just as everyone turns their head to look at other stocks and stories.
It also gains over time due to the one-sided and fierce nature of the selling that’s taken place.
With a purchase of some Netflix LEAP call options, say, the $75 calls for the year 2013, you would have the right to buy shares of NFLX stock right near where it trades today, after all this carnage. And you’d own that right all the way out to January 2013.
That’s your insurance policy, and buying those calls costs way less than the stock itself.
But don’t (just) wait for your long call to be profitable. Starting right now, you can bank some eye-poppingly high option premiums that you get to stick in your pocket — all while you wait and see what will become of NFLX.
Now here’s where the opportunity to generate regular weekly returns comes into play. …
With the new weekly options that get created every Thursday morning, you can become a seller of the week-to-week, volatile nature of NFLX.
To be more specific, I’ll choose to sell out-of-the-money weekly calls, up to two or three strike prices away from the current stock price. You can still put decent premium in your pocket, PLUS it will allow NFLX some room to run in case it wants to spike in any given week.
Remember, with weekly options, collecting four weekly option premiums equals out to roughly double the premium of the standard one-month (old-fashioned) options. That by itself is a compelling way to make money.
Not only this, but you have much more control when selling/collecting a week’s worth of premiums when compared to an entire month of time. For example, around earnings season, you can sell weekly premiums all the way leading into the week of the announcement, and then decide to lay off if you want until the news comes out.
With monthly options, you might have to forego selling options for the entire month that contains the unknown joker of the earnings announcement and its aftermath. This means for an entire month, you don’t create any income. There’s no fun in that!
Making the NFLX Weekly Options Trade
Buying the January (2013) $75 LEAP call option at current prices will cost you about $25.
Yet there’s more than 60 weeks before they expire … that’s at least 60 chances to collect roughly $1 or more on each option trade, PLUS give your LEAP option ample room to motor.
With NFLX trading around $80 and choosing an option that’s just a bit out-of-the-money, the November Week One $85 Calls could net you some nice income right now. These options just arrived “on the board” (as weekly options are issued on Thursdays). These calls look good here around $1.50.
What happens if NFLX dies on the vine? With all these weekly paycheck periods, it doesn’t take a math genius to see that you win even if it goes nowhere.
With this strategy, there is NO stock ownership, thus no margin requirements or margin calls.
It’s also a strategy you can do in most IRAs, as it’s one of the most basic and elementary options strategies. (You’re probably already approved to do this type of trade, but be sure to check with your broker first. If not, it may be time to find a better broker!)
I hope this finds you well and has you thinking about a stock like NFLX in a whole different way.
Over and out,
P.S. If you haven’t checked out my free information yet, you should. As you know, any good trading strategy for stocks or options boils down to this: You need to have an edge of “why this stock, and why now.”
Well, back during the market disaster in 2001 (witness the dot-com collapse as well as 9/11), I discovered a study that revealed 86% of the time a company released a certain, little-known piece of news, it made the stock go up over the next 3-6 months (and it’s not an earnings announcement).
I know this will be a powerful addition to your trading arsenal, so go there now and discover what this is. I’m only making it available for a limited amount of time.