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Netflix, Inc. Message Board

  • nw2000_ca nw2000_ca Apr 7, 2013 9:35 AM Flag

    Netflix Married Put Position:

    * Buy NFLX stock (existing or purchased)
    * Buy 2013 Sep 170 Put at $28.70

    At the peak price in February, the married put position mentioned in the previous article had a profit of around 170%. The profit was experienced while never having more than 8% of the investment at risk. Even if the price of the stock dropped to zero, the maximum loss that could have resulted was 8%. Netflix currently has around 27 million domestic subscribers and with 100 million households in the U.S., Netflix could easily and quickly double its subscribers and revenue. With Netflix potential and its reasonable Price-to-Sales ratio of 3, a further investment in Netflix is worthy of consideration. Since Netflix's future is still a little hazy, another married put position is considered for the company in order to protect against a large downdraft in stock price. A married put position may be entered by purchasing a put position against a long position in the stock. The expiration month for the put option is typically selected several months out in the future in order to reduce the "per-day" cost of the insurance.

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