Trade Alert: Kick Off Earnings Season With Netflix

Finally — we’re back in business!

After yesterday’s closing bell, Netflix (Nasdaq: NFLX) reported earnings for its fourth quarter — and the results impressed Wall Street.

The company topped analysts’ expectations by 15%, citing an additional 7 million new subscribers who had joined during the quarter.

As a result, the stock opened up by about 7% this morning — meeting our parameters for trading.

Based on our in-depth research into how this stock reacts to earnings results, we know that now is the time to buy calls on the company.

We also know the sweet spot for holding these calls is about three weeks, so the February option will do the trick.

In our backtest, our trading parameters were hit about 15 times. In only three of those 15 times did the stock fall after two weeks. The majority of the time, Netflix climbed, with gains ranging from a few percent to more than 25% — and it handed us an average gain of 75% in our call options just last quarter.

So I’m excited about the sizable return we could make in the options market this time around.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: Netflix Inc. (NFLX)
Option Type: Call Option
Expiration: Feb-17-2017
Strike Price: $140
Option Symbol: NFLX170217C00140000
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $5.50
Trade Deadline: If your order is not filled by my next update, I will update you on the trade.
Note: Do not place a market order. Set the limit order at $5.50.
Once this order is filled, place the following order:
Sell Action to Take
Stock: Netflix Inc. (NFLX)
Option Type: Call Option
Expiration: Feb-17-2017
Strike Price: $140
Option Symbol: NFLX170217C00140000
Action: Sell to Close Half
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: Whatever nets you a 50% gain.
Trade Deadline: Keep this order open until it is filled or canceled.
Note: This second order will allow us to collect a 50% gain on half of our position in the event that a quick move happens before I can get a trade alert out to you.

That’s all for now. Talk to you next week!

Until next time, good trading…

Jeff Opdyke
Editor, Earnings Drift Alert