Unusual Options Activity: Netflix (NFLX)

Traders up bearish bets after subscriber miss.

Put option trading in streaming giant Netflix (NFLX) saw a surge after reporting earnings Wednesday after the bell. Although the company missed on its total subscriber count for another quarter, and although the company has burned through nearly $10 billion in cash in the past few quarters, shares still managed to gain nearly 3 percent in trading, sending some traders to make bearish bets.

One interesting bet is the October 25th $297.50 put.

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  • With shares just under $296, the trade is slightly in-the-money ahead of expiration next week, and should move dollar-for-dollar with shares if they decline following their earnings. With shares of Netflix closer to their 52-week lows rather than highs, however, it’s a tough bet to make.

    Action to take: Skip the short-term bearish bets. With a number of companies getting into the streaming space this year, shares of Netflix also have limited upside. Investors should skip the shares until the company’s cash flow isn’t so negative.

    Traders looking to go short would be better off with the June 2020 $250 puts. They’re a bit pricier than the October options, as they trade at $15.50, or $1,550 per contract. However, they’re  a better bet on 100 shares of the company continuing to decline in the months ahead rather than a roll of the dice on the next few trading days.