Do you like original content offered by Netflix, Inc. (NASDAQ:NFLX )? If so, you’re not alone. NFLX stock is paying off for “subscribers” off and on the price chart, as reflected by its ever-growing popularity. Let me explain.
Netflix stock’s quarterly report last month once again surprised Wall Street, which has continued to underestimate the streaming video-on-demand giant’s ability to grow. One key item supporting Netflix’s growth was subscriber growth — 7.4 million subscribers to be exact — which increased a full 50% from the year-ago quarter. Netflix also boosted its total base to 125 million paying users.
Internationally, the expansion into newer markets has been topping expectations and offers large growth potential to come. While Netflix has increased its lead as top dog in the SVOD market and over chief rival Amazon.com, Inc. (NASDAQ:AMZN ), the company’s global capture of less than 10% thus far suggests much more growth to come for NFLX stock.
But even stateside and in Netflix’s most mature market, continued growth has been ever-impressive. There is strong support behind consumers pulling the plug on cable — substantial savings for those making the switch.
Of course, Netflix doesn’t offer some sports content, well as of yet, so it’s not a perfect comparison and there are obvious trade-offs. But with the company’s impressive and growing move into very well-received original content, some trade-offs continue to look better and better for subscribers off and on the NFLX stock price chart.
NFLX Stock Weekly Chart
Do you like ‘original content?’ If you subscribe to happy endings in an imperfect world, Wednesday’s breakout from a slightly-irregular or flawed cup pattern in NFLX stock is providing staunch confirmation of just that sort of idea—and that shares have more upside in store.
Back in April following earnings NFLX pushed to fresh highs from a cup-without-handle pattern. The unsuccessful attempt at breaking out resulted in a few extra weeks of pattern development and a much stronger sequel as shares have now decisively broke above April’s high on strong and above-average volume.
Due to the last month’s failed attempt, technically the more durable-looking cup won’t win any ‘Best Picture’ nods from purists like Investor’s Business Daily.
More importantly, in following the money, today’s modestly-flawed cup, looks like a crowd favorite worth subscribing to.
NFLX Stock Bullish Modified Butterfly
For investors that buy the presented bullish story-line above, but remain ever-mindful of risk, a bullishly-placed and modified long call butterfly is an attractive way to position. One combination of interest is the June $345/$360/$370 call butterfly priced for $3.75 with shares at $344.72.
This spread maintains an expiration break-even of $348.75 and then offers bullish investors the opportunity to participate dollar-for-dollar with NFLX stock up to $360 and a max profit capture of $11.25.
Above $360, which is roughly 7% higher from current levels, the position will start to give back those gains at the same rate of change. Thus, too much upside is the downside with this spread. However, unlike a regular butterfly, a minimum profit of $1.25 is guaranteed if NFLX stock manages to climb through the $370 call strike.
Considering this spread’s real downside exposure below $345 is kept to roughly 1% of owning Netflix shares; bottom-line, this combination is a nice tradeoff to subscribe too.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
