Nasdaq stocks continue to dominate the landscape. The latest round of earnings simply added gasoline to an already raging fire. But with the majority of the popular FANG stocks already skirting the stratosphere, it’s challenging to find low-risk entries. Unless you’re looking at Netflix, Inc. (NASDAQ:NFLX), that is. Unlike its peers, NFLX stock yet remains close to its rising 20-day moving average.
And while the rest of its pals have already busted through well-established resistance zones, NFLX hasn’t. But it’s getting darn close, and that’s what attracted me to it for today’s pick.
Year-to-date, Netflix is already up 63% in what can only be described as a banner year for shareholders. At $201.50, it sits a mere pebble toss from record highs. The consolidation striking the stock over the past month has allowed the 20-day moving average to catch up, making it one of the least extended stocks of the coveted FANG gang. And that makes it a much easier stock to buy.
Netflix shares have a long history of rewarding breakout buyers. More times than not, breaching resistance delivers swift follow through and big profits to buyers. Here’s to hoping such an outcome awaits for the upcoming breakout over $203.
The Netflix Trade
With earnings fading in the distance, implied volatility has receded to the lower end of its one-year range. And that means option premiums are cheap once more.
To capitalize on the next breakout, consider buying the Jan $200/$215 bull call spread for $6.30. The max loss is limited to the initial debit and will be forfeited if NFLX sits below $200 at expiration.
The max gain of $8.70 will be captured if Netflix shares can rise above $215 by expiration. By risking $6.30 to win $8.70, the option spread offers a potential return on investment of 138%.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
