Stock prices plummet. Renovation of the C suit. Corporate layoffs. The takeover bid failed. This isn’t a new Netflix drama, but rather a drama surrounding the streaming giant, whose stock price has fallen nearly 50% from its all-time high and profits are sluggish.
Options traders are betting the drama is nearing an end.
Current option prices imply a 9% post-earnings move, the highest since the company’s Q3 2022 report, which had priced in an 11% move. Netflix’s stock price outperformed this implied move as it surged 13% in the quarter. This time, instead of the almost automatic disappointment that comes with each quarter, there are signs of optimism. The median stock price change over the past eight quarters was 7.25%.
As of 12:00 PM ET on Tuesday, calls were bought 1.5 times more than puts on Netflix, and there were more puts sold than bought on more than 150% of the average daily volume. Six of the 10 most purchased contracts are call contracts, five of which expire this Friday. When a trader sells a put, it is a bullish strategy.
The single largest trade on the Netflix tape was a seller of a series of 70-strike puts expiring on Nov. 20, totaling just about $2 million. Remarkably, these contracts are right on the money, making this trade an important vote of confidence for a stock in desperate need of some reassurance heading into this afternoon’s paper.
Netflix, since the beginning of the year
Call buying of the 80-strike call expiring this Friday was also noticeable. Traders bought more than 3,500 of these contracts at premiums worth more than $210,000. For context, to break even, Netflix’s stock would need to rise at least 20% by Friday, more than double its implied rise.
Traders appear to be betting that Netflix’s losing streak could end soon.
