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Netflix, Inc. Message Board

  • caliguy2015 caliguy2015 Oct 24, 2011 11:25 PM Flag

    Lost $ 672,000 !!!!!!! Sold 700 Nov 110 PUTS

    That's 70,000 shares, only had $470,000 in my account.

    I was playing a technical bounce but got nailed.

    Does chapter 11 cover Broker debts ? approx balamce is $300,000-

    My house is paid for, can they take it ?

    Wife said back in 2002, next time you do this, we are done.

    Her parents are wealthy and they tossed us 500k to recover from a short that went bad in 2002. Suggestions ?

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    • Time to write some bad checks, horde some cash, fill up the gas tank, go to Vegas Baby!!! Coke and Whores like coffee and doughnuts! Don't think about it, it'll go away! Just keep drinking!

    • OK Kiddies,

      #1 - While I am unsure of the price you sold these puts, selling 700 puts @110 for the closing price of 5.2 would yield 5.2*100*700 = $365,000 in premium. Sounds like a lot, but remember the selling price is the maximum possible gain for this trade.

      #2 - Also, while selling naked puts is not an "unlimited" loss position, this trade had a total liability of $7,700,000 given 700 puts @110 for WK4, and a maximum drop possible for NFLX all the way to 0.

      #3 - Subtracting #2 from #1 yields a potential total risk of $7,335,000 with a gain capped out at $365,000.

      #3 - Dividing $7,335,000/$365,000 yields a risk multiple of 20:1 in the worst case. In other words, given some form of tail-risk and the collapse of the stock, the total potential risk is more than 20 times your maximum possible return.

      #4 - A drop from 110 - 85.5 places a par value on 700 puts @ 110 at (110-85.5)x100x700 = $1,750,000, plus premiums.

      #5 - 1,750,000 - $365,000 = -$1,385,000 par loss if sold at EOD mon.

      #6 - $1,385,000/$365,000 = actual net-loss factor of 3.79x. Almost 4:1 out of a max 20:1 max-risk/max-gain. However, this is only based on numbers which could change before your broker initiated the margin call.

      #7 - Because a 4:1 loss of $672,000 is unaffordable for you, any loss up to the max of 20:1 or $7,335,000 would then obviously also be unaffordable.

      #8 - Thus, it seems unreasonable for yourself, and unethical for your broker to initiate this position without insurance/hedging to contain the maximum risk which was known before the trade, and greatly exceeded your net-worth by more than 20x.

      #9 - File a lawsuit against your broker, CBOE, NFLX, and the MM before filing chapter 11.

      #10 - If someone can loan you the money, negotiate with your broker and come to an agreement, roll over into longer expiration, buy time and continue trading, seek the advice of an experienced hedge fund manager, and control-risk.

    • good one.

      mocking the real victims who bought NFLX above $120?

    • I actually thought so. Like it! Thanks for the advice. I'll wait til sub 80. Nflx ain't goin' away and will maintain a lead over competition for years. Worldwide baby! Once built out, cash flow will be incredible. Numbnut shorts now are as dumb as longs at 300! Watch and learn funny-man!

    • be nice to ur father in law...sounds like a great guy!!

    • If you lost you wife bro, I'll screw her...

    • With $470,000 in your account, broker will not allow you write that many uncovered puts. So if you really had written that many puts. You should be okay even though will lose quite a lot of money. Your original balance must be over $2.4mil.

    • This story is absolutely cracking me up.

      If her parents are kicking 500k at you for inconpetent trading and she works as a nurse, that just doesn't add up.

      I know of a similar situation, up here in Maine where one of the Ford family daughters married a deadbeat, blowing money all over. They just bought him a house gave him a fairly good payoff, he signed a contract never to see the family again and that was that. He still has a house in the area. If your wife's family has that much money they would probably do the same for you. A win win for all.

    • Dude, are you crazy? You knew there was a real possibility the CC would be worse than expected. That said, you don't put your life savings on something you know is risky without hedging it. You could have hedged it for only $50k. That's 10% on some out of the money puts ($80 October) in case of a disaster. That $50k would have protected your entire investment and probably made you a huge profit come tomorrow. Man, I thought I was bad. At least I'm broke and don't have money to hedge my bests but you had plenty to spread it out.

      I feel for you man - I hope your wife sees that you're trying to make money but with uneducated risks like that you're not investing you're gambling. Man, if I had $500,000 to work with I really think I'd make a few million per year with limited risk. Good luck, God bless you!

    • Time to get rid of her and find another sugar mama so you can buy more nflx stock.

      "We made some mistakes, but I think our 10-year track record is extremely positive. We are going to focus on making this a great global streaming business. I am very excited about that."

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