Never Tired of NFLX
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Never Tired of NFLX

Henry Gambell - March 18, 2016

Good evening everyone. This is Henry Gambell with In tonight's free video, I want to take one more look at Netflix. Next week I will likely move over into a new ticker, but I've really enjoyed looking at this one each night, because it gives you a setup, then it allows you to follow up on that setup, and it's from start to finish.

Looking at the analysis, the setup, the trade, and being able to follow up on that, I think makes all these things click just that much better. We've been coming back looking at the daily chart, addressing the support that's come to 95 so many times. The fire line and symmetry did a great job of holding its initially, and then as the trend started to find its footing within a very good job of respecting the 21 EMA. That was the basic analysis off the daily chart. When we come down into the four hour, that's what makes this even that much more interesting. So I think Netflix has more room to the upside, and I think there's a couple different ways you can look at that.

So as far as the expiration for this week goes, one of the things that we've been working, is looking at trades like these unbalanced butterflies. We initiated these on Monday, with the idea that you're selling them at a point where, at the time, they were a bit in the money, and you're able to take in a credit on the initiation of that trade. Today when we get to pop up above 100, that's the best possible spot that you could be in.

Because what you're trying to do is get your $100 puts out of the money, while still maintaining the intrinsic value of the 103 put, and the best possible price to do that at would be $100 and a penny. So NFLX did sell off a little bit into the end of the day, trading here around $99.72, but if you'll notice here, on the market price of the underlying, it notes it at $100.75, and if we come back to our charts and look at time and sales, you are seeing some decent price action go across here at higher prices.

So in a perfect world, what will happen tomorrow is NFLX opens at $100, and that will be a gift to take off that spread. If it consolidates anywhere near there into the end of the day, and this is why I said there is two ways you can trade this now, so that's the way we played it on Monday into Friday. From Friday morning into the end of the day, if you care to play it that aggressively. I just think it's worth pointing out the open interest on the $100 puts and the $100 calls. That would suggest that NFLX may sit here and, you know, trade very close to that towards the end of the day.

The best way to take advantage of that is the short straddle, though that trade won't be for everyone, and it will carry less of a credit tomorrow. The other way that I would look at it, if you like the idea of saying, I think Netflix will either consolidate at 95, or move higher, that's when I would look at something like this. One month three strike unbalanced fly, and if we do that here around 95, that spread is going for ... and I would adjust this a little bit more. Let's come in and look at buying this fly, and then adjust our strikes out to be even with them. Stick to nice round values. Ideally we get a little bit of liquidity, and that's more like what I would look at on that one. So if you get an $0.08 credit, you have $190 of risk in the trade, you're gonna stand to make about the same way, and that's a fine way to participate into next week.

I hope that helps, gives you a couple of different perspectives on Netflix. Next week we'll look at another ticker, and apply the same concepts. And then one last thing I wanted to follow up with on this, is just to let you guys know about a class that Chris Brecher will be teaching tomorrow. So, the live trading will be on Friday. That's tomorrow from 8:30 to 11 CST. If you'd like to look at more of what he's doing, in relation to the day trading stuff, I think you'll find that beneficial. You guys have a great weekend, and I will see you at the next free video.