Repair Strategy for NFLX Short Put
- Thread starter learningoptiontrading
- Start date
Well it was certainly a wild ride on NFLX - I was long the C JAN19 300 - this is a directional position where I use options purely as leverage. This is a position I opened on feb 12 and there was a considerable profit in it. I had been thinking about rolling it as the option was getting under 6 months to go. Of course it lost 50% of its value in the moments after the market opened yesterday but when the market stabilised i exited at just under 80$ and rolled into the C jun19 400 at $43 with 50% more contracts but cash wise of course less than I was in. By the end of the day the position showed more profit than if I held onto the 300 calls. I would like to call this foresight but that was just a lucky break. Just saying that yesterday you could get really wild swings in your position + or -.
** Thanks for the call-out, but if I can note: it's premature.(As in, next Friday -- when both the $390 put *and* the $10 call spread at $395 both might die uneventful deaths...)
** The roll down/out *cost* you a week of Ass-In-The-Wind time -- none of us believe it likely right now, but NFLX *could* continue down."Agggh!"
** The roll down/out *also*cost* you $2.50 which you could eat (and which might have grown instead of shrunk from today's open til close), but to remain revenue neutral, you.....
** You took another spread -- now splitting/sharing your incidence of risk to both sides of the market, by taking Jul27 $10-wide at 395/405.
** Without quibbling about nickels, if you got close to the $2.50 which you paid to roll the put down/out, you're flat on NFLX post-debacle. (And if you only got $1.90 as per the end-of-day numbers, "Meh!" Still pretty good. You've salvaged a goodly $12{???} of the $13.50{???} you took in.)
** BUT!! You're still "IN" the NFLX market for an extra week of exposure, on bottom at $390, on top (with $5 freeboard) for $10-wide, at $395.
MONITOR THOSE. NFLX could clear $395 *tomorrow* -- what are your new exit plans?
(Start planning now.)
OKAY!!! SO!!!!
F'in' NFLX has breached $370 (to the downside) again.
The $390 put (now a week away) has climbed from $16?? to $24. ("You Bastards!")
That's the bad news.
The good news is that that $395/05 call spread has gone from nearly $2 to <50¢.
I have not/won't run any numbers, but I'd sure be a'lookin' at that call spread. I mean, 50¢ for an entire WEEK???
It might be worth a look to go from Jul27 to Aug03 on the ITM put -- maybe snag another $5 lower to 385??, and then buying the Jul27 spread back, and selling another (just-for-example) 390/400 on the same expiry??
Just thinking out loud.....
But, not having a plan is ....
not a good thing.
In general for earnings with something like NFLX buy a strangle somewhere less than 1% away from the price. Bad earnings price should drop less than 1% and same for good earning on the plus side. DS the call or put difference should make you $. If the stock has been down for a while then good earnings will pop it more and vice versa. So look for those stocks. NFLX premiums trend to be expensive.
i want to point out some facts about nflx that the member who started this thread must give a lot of consideration to:
- nflx has not been profitable in years, its free cash flows have been negative for tens of consecutive trimesters and they have no horizon to even begin to reverse this situation.
- nflx is the company with the worst cash burn in the history of modern business. and it keeps getting increasingly worse.
- nflx will at some time reach saturation point where there are no more prospective paying clients it can add anywhere in the world.
as always, everyone must do their own research and do their due diligence. these facts can be easily corroborated and expanded. so, in conclusion, nflx has not even come close to making any money in years, it keeps burning through ever more cash annually and it was only infinite stupidity and the myth of subscriber growth that have kept that turd inflated at more than 200 ttm pe ratio. so, every investor has the final word, ¿can this idiocy keep going on forever?
- nflx has not been profitable in years, its free cash flows have been negative for tens of consecutive trimesters and they have no horizon to even begin to reverse this situation.
- nflx is the company with the worst cash burn in the history of modern business. and it keeps getting increasingly worse.
- nflx will at some time reach saturation point where there are no more prospective paying clients it can add anywhere in the world.
as always, everyone must do their own research and do their due diligence. these facts can be easily corroborated and expanded. so, in conclusion, nflx has not even come close to making any money in years, it keeps burning through ever more cash annually and it was only infinite stupidity and the myth of subscriber growth that have kept that turd inflated at more than 200 ttm pe ratio. so, every investor has the final word, ¿can this idiocy keep going on forever?
The market can stay irrational longer than you can stay liquid.
With Amazon Prime Video being a major competitor of Netflix, I’m thinking NFLX may experience more movement after AMZN’s earning release this week. Any thoughts?
** Thanks for the call-out, but if I can note: it's premature.
** The roll down/out *cost* you a week of Ass-In-The-Wind time -- none of us believe it likely right now, but NFLX *could* continue down.
** The roll down/out *also*cost* you $2.50 which you could eat (and which might have grown instead of shrunk from today's open til close), but to remain revenue neutral, you.....
** You took another spread -- now splitting/sharing your incidence of risk to both sides of the market, by taking Jul27 $10-wide at 395/405.
** Without quibbling about nickels, if you got close to the $2.50 which you paid to roll the put down/out, you're flat on NFLX post-debacle. (And if you only got $1.90 as per the end-of-day numbers, "Meh!" Still pretty good. You've salvaged a goodly $12{???} of the $13.50{???} you took in.)
** BUT!! You're still "IN" the NFLX market for an extra week of exposure, on bottom at $390, on top (with $5 freeboard) for $10-wide, at $395.
MONITOR THOSE. NFLX could clear $395 *tomorrow* -- what are your new exit plans?
(Start planning now.
So *again* I remind, that if you get stabbed by a position and chose to 'work it out' instead of exiting immediately, any "relief" felt is *premature* -- YOUR ASS is still hanging in the wind: exposure is *still* there, and PERHAPS is undiminished.
NFLX went from ~$400 ↓ to $340 overnight, to nail the OP's naked $395 put for ~$55.
It recovered to ~$370 or more pretty quick, but since then, has leaked back down to go below the original drop of $340.
Depending on the OP's best knowledge of the underlying, I observed that a $5 roll-down of the now-deep ITM put would cost ~$2.50 -- an easily recoverable sum from limited-risk call verticals placed *above* the new, lower put strike. "Rinse&Repeat" for a couple of months, and you're out.
BUT IT DOES LEAVE YOU IN THAT MARKET.
I recall the OP having exited, and I hope that that is the case. but it's important to note that the deeper ITM an option goes, the harder an offsetting vertical (that is not closer to the market) will be, without going further still in DTE. Egads.
"Don't count your chickens til they're expired."