NFLX

Why Are NFLX Traders Always Wrong

NFLX had earnings today and the stock moved 17.00 dollars, rallying past 115.  The straddle was pricing in a move of less than 10 dollars yesterday.  Hey, surprizes happen...however NFLX has outperformed its earings straddle for 4 straight quarters, ever since they started producing their own content.  Take a look:

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www.livevol.com LivevolX (r)

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NFLX has competition

We have another day like last week where the rally came from nowhere and is most likely not going to go anywhere.  It feels like the algo driven market catches any new piece of news about the FOMC release and it is off to the races.  The last 6 months has been about macro freight trains, collapse of the Euro, oil and commodity  prices with a rocketing dollar.  Greece isn’t even in the headlines anymore.  As day went most stocks were up and VIX softened a bit before the Wednesday’s release.

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Loved Stock Trade in FB

I have been discussing what I call the 'LOVED STOCK' earnings chart over the last few days.  This is a pattern where an AMZN, NFLX, or FB rallies in anticpation of earnings.  The stock then gets sold out of earnings as it disappoints traders.  Finally, within a couple of days of the sell off the stock begins to rally again earasing some of the losses from earnings.  The only stocks that are 'loved' that did not show this pattern so far is TWTR.

With FB appearing to create this pattern and FB IV in the dump (See chart)

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NFLX Vol Probably Too Cheap

We all know that as companies mature there can be some permanent changes to the implied volatility of its options.  They can go from low to high and back.  Think how the IV of Corning (had their been options) would have appeared when they were in the business of making ugly cookware vs high end glass.  That being said,  when a stock hits a certain level of volatility that the options become disgustingly cheap it usually makes sense to buy some premium.  Take a look at NetFlix IV:

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