BotTrigger Trade Alert: $NFLX sold the October $360 - $370 Vertical call spread @ $3.35 | entire position. So we're closing this position out pretty much right where we bought it. We're at the "no harm no fowl" stage of this still so we're going to close this out entirely and just wait to see if Netflix can get back above $350. We're interested above $350 on the long side. Below $350 and we simply have to wait. First off, take notice of how well this particular position did in holding it's value during this downside flush. However, the technicals at this point suggest that this breakdown could continue further to the downside. Netflix does have a gap to fill around the $235 to $228 area. If this breakdown is indeed real, that's very likely where Netflix will be heading before finding it's bottom. We won't take that chance riding that down.
Although NFLX is at an attractive relative discount relative to the historical scale of pullbacks, the technicals on the chart show too much damage for us to be interested in holding this till October expiration. We want Netflix above $350 not below it. With such a strong flush to the downside with the rest of the market rolling over on Trumps pending gov shutdown, all of this suggests raising a larger position of cash at this point. Let this all come in and strong buying opportunities will show their hand. For now, our SPY puts we purchased on Friday are acting as our hedge to mitigate portfolio value.
BotTrigger Trade Alert: $NFLX bought the October $360 - $370 Vertical Call Spread @ $3.30 for a 3% starting position. We may add further to this by the end of the day pending price action.
MAX GAIN: $10 which is a 203% Gain so long as Netflix is @ or above $370 upon October 19th, 2018 expiration
BREAK EVEN: NFLX @ $363.30
MAX LOSS: NFLX @ or < $360 upon expiration
For Tuesday: A large gap down this morning with earnings season in play. Poor results from Netflix (NFLX) are causing many stocks to gap down.
Netflix is now down from peak to trough -18.72%. If we look back at Netflix's behavior after such a pullback, we're at the very extreme end of where Netflix historically sees a very strong retracement of that pullback as the market attempts to correct the overreaction. Take notice of the prior pullbacks on Netflix here on this daily chart going for over a years worth of data. Notice the % of the pullback and the # of days from the top to the ultimate bottom. Then notice the ensuing recovery. You'll notice in all cases it wasn't too long before Netflix revisited it's previous pivot high and then eventually broke out higher to new ATH (all time highs). We're playing this specific spread because it gives us exposure to the recovery just in time for the next earnings which will very likely be right around October 18th. This call-spread expires on the next day that Friday October 19th. One could opt to buy this same spread which expires in November which is slightly cheaper and affords you a whole more month worth of time for the recovery. Either way, we can anticipate a retest of the $423 highs at some point from now till October/November in anticipation of a price recovery en route to the next earnings report. We don't have to hold these calls till expiration. If Netflix makes that price recovery in short order, we'll gladly roll them over if not close them out with a nice gain either way.