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) – STOP LOSS
SELL the Netflix, Inc. (NFLX) October 2022 $250-$255 in-the-money vertical BEAR PUT spread at $2.70
Closing Trade – NOT FOR NEW SUBSCRIBERS
9-20-2022
expiration date: October 21, 2022
Portfolio weighting: 10%
Number of Contracts = 25 contracts
This was a bet that floundering streaming minnow Netflix (NFLX) would stay below $250 in the next 37 days.
The price action has been highly bullish since we bought NFLX outpacing the broader NASDAQ market.
A slew of upgrades and Wall Street coalescing around this beaten-down name means NFLX stock is experiencing a dead cat bounce.
NFLX management is overselling the hype of the ad-based content package they are planning to roll out in the future.
Netflix with ads = cable television.
I believe this product will bomb but this positive price action signals that Wall Street and their algos are buying the news to the detriment of our bear put spread.
Shockingly, the Nasdaq has been down big the last week and I assumed that NFLX would get dragged down with it, but it hasn’t.
My other choice at the time was META stock (META) which has behaved more logically.
Long term, I believe NFLX is done. It’ll never get back to its previous heights or accrue the cultural capital it once had. Once Wall Street realizes that the ad-based NFLX is also unimpressive, watch out for another NFLX selloff.
There is no possible way NFLX will and should get priced as a growth stock. Hyping it up is just trying to secure a growth multiple for a company that is past its prime.
Here are the specific trades you need to exit this position:
Sell to Close 25 October 2022 (NFLX) $255 puts at…………$23.80
Buy to Close 25 October 2022 (NFLX) $250 puts at..……….$21.10
Net Proceeds:……………………..…….………..................…….....$2.70
Loss: $3.90 – 2.70= $1.20
(25 X 100 X $1.20) = $3,000 or 30.7%
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.
