Trade Alert - (NFLX) April 26, 2021 - BUY

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.

 

Tech Alert - Netflix, Inc. (NFLX) – BUY

BUY Netflix, Inc. (NFLX) May 2021 $460-$465 in-the-money vertical BULL call spread at $4.35

 

Opening Trade

4-26-2021

expiration date: May 21, 2021

Portfolio weighting: 10%

Number of Contracts = 23 contracts

This is a short-term trade that streaming company Netflix, Inc. (NFLX) will stay above the strike price of $465 in the next 25 days.

NFLX nosedived by over 9% on subscriber growth numbers that were far less than expected.

All the dip gave us investors is an optimal buying opportunity and bagging 7 awards at the Oscars means this company can back up the quality.

The streaming giant's net addition of a little less than 4 million paying customers fell short of forecasts for 6.25 million new members. Some see this news as a sign that the pandemic-prompted swell of streaming sign-ups is all but over.

Largely lost in the noise of a membership shortfall, however, is that Netflix more than doubled its year-over-year profits. The first quarter's bottom line of $1.7 billion is a 140% improvement on net income of $700 million earned during the first quarter of 2020.

I mentioned this phenomenon in the tech letter of comparable metrics in the upcoming earnings quarter being difficult to surpass making the company look like they are failing.

These tech companies are not failing, much the opposite, the 2020 pandemic has made year-over-year numbers hard to top and I view a dip in Netflix as a great entry point for a short-term trade.

Profitability is going gangbusters at NFLX and this is a story that I still very much want to be a part of.

As the migration to digital increases throughout the developing world, Netflix's subscriber base will soar.

DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.

If you don’t do options, buy the stock because my yearend target is $800.

Here are the specific trades you need to execute this position:

Buy 23 May 2021 (NFLX) $460 calls at………….………$47.53

Sell short 23 May 2021 (NFLX) $465 calls at………….$43.18

Net Cost:……………………..…….……….................…….....$4.35

Potential Profit: $5 - $4.35 = $.65

(23 X 100 X $.65) = $1,495 or 14.94% in 25 days

 

If you are uncertain on how to execute an options spread, please watch my training video by clicking here.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.

Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.