Movie watchers and momentum lovers rejoice. Shares of beloved Netflix, Inc. (NASDAQ:NFLX) have returned to their former bullish glory and are poised for another run to all-time highs.
As is oft the case, NFLX stock’s abrupt turnabout was driven by its latest earnings announcement. The message of increased earnings and rapid subscriber growth streamed loud and clear over Wall Street as investors’ greeted the news with a frenzy of buy orders.
With shares of NFLX up a fast 30% in the past few weeks you would think profit-taking would take the stock lower for a spell. Impressively, however, selling pressure has been muted and any and all dips have been quickly bought, keeping NFLX stock floating just beneath resistance at $460.
Indeed, the price action of late has been as well-mannered as any bull could hope for. The recent pair of higher pivot lows shows a continued aggression in the behavior of dip buyers.
And the absence of high volume down days suggests the bears have been rendered impotent in their bid to knock NFLX stock from its lofty perch.
If this behavior persists a breakout over the $460 level should materialize in short order.
Press Play on NFLX Options
While the stars certainly appear to be aligning for a breakout and renewed advance in NFLX, we can structure an option trade to profit even if the stock becomes unruly. Selling an out-of-the-money bull put spread will deliver profits to your pockets whether NFLX stock rises, stagnates, or even falls a little.
Sell the Mar $415/$410 put spread for 85 cents or better. The reward is limited to the initial 85 cents credit and will be captured if NFLX can stay above $415. The max loss is limited to the distance between strikes minus the net credit, or $4.15, and will be lost if NFLX falls below $410 by expiration.
To limit the loss I suggest exiting if NFLX falls below the short put strike price at $415.
At the time of this writing Tyler Craig owned bullish positions on NFLX.
