Unusual Options Activity: Netflix (NFLX)

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  • Streaming giant Netflix (NFLX) has had a big increase in competition in the past two years. But that hasn’t stopped one trader from making a hugely bullish bet on the company.

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  • That’s based on the June 2022 $950 calls. That strike price is about 85 percent higher than where shares currently trade. The buyer paid about $8.10 for the contract, which expires in more than 450 days. Over 6,000 contracts traded, a 39-fold jump from the open interest of 154.

    Netflix has seen a 42 percent rise in the past year, actually underperforming the S&P 500. Revenue growth is solid at 22 percent, and shares are trading at 53 times forward earnings.

    That’s a bit of a stretched valuation, but if the company can come up with a successful initiative to boost its share price, long-dated call options could end up exploding higher. Shares have also traded close to $600 in the past year, so an attempt to break to new highs could be bullish for call options bought now as well.

    Action to take: This is an inexpensive trade, as it is dependent on a big move higher. Traders looking for a potentially large return on a big jump in shares may want to get on board. Traders looking for a higher likelihood of the trade working out and who are willing to pay more upfront for that lowlihood should look at options with a lower strike price.

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