DailyPlay – Opening Trade (NFLX) Partial Closing Trade (TLT) – October 12, 2022

Partcial Closing Trade

• TLT -66.39% Loss: Buy to Close 2 Contracts Oct. 14th $102/$98 Put Verticals @ $1.98 Debit. DailyPlay Portfolio: By Closing 2 of the remaining 4 Contracts, we will be paying $396.

NFLX Bearish Opening Trade

View NFLX Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 3 Contracts Nov. 18th $205/$180 Put Vertical Spreads @ $8.35 Debit.

Total Risk: This trade has a max risk of $2,505 (3 Contracts x $835).

Trend Continuation Signal: This is a Bearish trade on a stock that is experiencing a bearish trend. 

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 125

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

As equities trade near new relative lows going into new earnings season, all eyes turn to Q3 corporate earnings for how 2022 will end. With the banks reporting this week, we will get a glimpse into the health of the US economy. Looking ahead into next week’s big earnings week, one name stands out to me as a potential bearish opportunity. After 2 disastrous back to back earnings, all things have been quiet on the NFLX front. After an attempt to base and trade higher into the $200’s, Netflix’s outlook has not improved and at risk of a pullback into the $100’s. Currently trading at 20x next year’s earnings estimate (which I feel is still very optimistic) is a hefty premium after seeing a 10% decline in earnings for 2022. Trading at 16x would target $175 to the downside. Additionally, the weekly cloud model shows NFLX just broke below its conversion line after finding support above it in July. This leads me to believe that the base formed above $225 has been broken and NFLX will likely head back towards its previous lows of $170.

I’m looking to buy the Nov $205/$180 Put Vertical @ $8.35 Debit for a bearish earnings play.

NFLX – Weekly