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Netflix Option Trader Makes $73.6M Bet On 5% Upside

Wayne Duggan

Netflix Inc (NASDAQ: NFLX) shares are up 40% in the past six months. The streaming video giant appears to have gotten a boost from shelter-in-home environment, and at least one large option trader is making a huge bet on more upside ahead.

On Tuesday morning, Benzinga Pro subscribers received two option alerts related to unusually large Netflix trades:

  • At 10:31 a.m., a trader sold 8,000 Netflix call options with a $290 strike price expiring on June 19 at the bid price of $139.70. The trade represented a more than $111.7-million bearish bet.

  • Less than 1 minute later, a trader bought 8,000 Netflix call options with a $360 strike price expiring on Nov. 20 at the ask price of $92.05. The trade represented a more than $73.6-million bullish bet.

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of Tuesday’s Netflix option trades, they could certainly be institutional hedging.

Netflix shares traded higher on Monday without any major news from the company. Netflix has lagged in the past month — along with several large-cap tech stocks — as the hardest-hit stocks of the downturn have rallied hard.

Netflix is coming off an exceptional first quarter, where customers stuck at home drove 15.7 million global paid net subscriber additions, blowing consensus estimates of 8.2 million subscribers adds out of the water.

NFLX Chart

It’s difficult to know exactly what option traders are thinking based strictly on the trades that are executed. But given the sizes of the two trades, the timing of the two trades, and the fact that both were for 8,000 contracts, they were almost certainly executed by the same entity. Most likely, the trader was simply cashing out of the Netflix calls expiring later this month and rolling that bullish bet forward to November. The November calls have a break-even price of $452.05, suggesting at least another 4.9% upside from current levels.

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Photo courtesy of Netflix. 

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