DailyPlay – Opening Trade (NET) – December 12, 2025

NET Bearish Opening Trade Signal

Investment Rationale

Investment Thesis
Cloudflare Inc. (NET) continues to show signs of vulnerability as its recent rebound occurs against a backdrop of stretched valuations and deteriorating profitability. While the stock has displayed strong multi-year growth, the current setup suggests limited upside relative to downside potential. With sentiment stabilizing after a failed breakout and sector momentum showing signs of fatigue, the risk/reward profile supports a bearish stance as the stock approaches prior resistance.

Technical Analysis
Cloudflare’s recent price action has weakened, with the 20-day moving average crossing below the 50-day in late November, marking the first time since May that the 20-day has traded beneath the 50-day and signaling a shift in short-term momentum toward a bearish bias. The 50-day moving average recently proved to be a resistance zone. Additionally, a Bearish Trend Following alert triggered on the OptionsPlay platform, indicating that the latest rebound occurred within a broader downtrend and may offer a favorable setup for downside continuation. With momentum indicators rolling over and price rejecting overhead resistance, the technical backdrop remains aligned with further weakness ahead.

Fundamental Analysis
Cloudflare’s long-term growth profile remains impressive, yet its valuation continues to exceed sector norms by a wide margin. Profitability challenges persist, and despite robust top-line expansion expectations, the firm is still contending with negative margins—leaving limited room for operational missteps. These factors, combined with elevated forward multiples, strengthen the case for downside risk as the market reassesses premium-priced growth.

• Forward PE Ratio: 177.15x vs. Industry Median 22.53x
• Expected EPS Growth: 29.13% vs. Industry Median 10.99%
• Expected Revenue Growth: 27.88% vs. Industry Median 9.35%
• Net Margins: -5.12% vs. Industry Median 9.08%

Options Trade
A defined-risk bearish position can be expressed through a bearish call vertical spread using the Jan 16, 2026 210/220 Call Vertical—selling the 210 call and buying the 220 call—for a net credit of $4.07. This establishes a maximum potential reward of $4.07 with defined risk capped at $5.93, creating a risk-reward profile of roughly 1:1.46. The trade reaches maximum profit if Cloudflare remains below the 210 strike at expiration, while losses are limited as long as the spread does not fully move in-the-money above 220.

NET – Daily

Trade Details

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish Credit Spread

Details: Sell to Open 3 NET Jan 16 $210/$220 Call Vertical Spreads @ $4.07 Credit per Contract.

Total Risk: This trade has a max risk of $1,779 (3 Contracts x $593) based on a hypothetical $100k portfolio risking 2%. We suggest risking only 2% of the value of your portfolio and divide it by $593 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is expected to continue lower over the duration of this trade.

1M/6M Trends: Neutral/Neutral

Relative Strength: 7/10

OptionsPlay Score: 103

Stop Loss: @ $8.17 (100% loss to value of premium)

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Entering the Trade

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

PLEASE NOTE that these prices are based on Thursday’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. 

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