Netflix Inc.
XNAS:NFLX 11:05:46 AM EDT
75.79
-0.50
(-0.66%)
Netflix Inc, NFLX, earnings, options, intelligent
LEDE
This is a simple option trade that starts two-days after Netflix Inc (NASDAQ:NFLX) earnings and lasts for the one month to follow, that has been a winner for 3 straight years.
Netflix Inc (NASDAQ:NFLX) Earnings
While the mainstream media likes to focus on the actual earnings move for a stock, that's the distraction when it comes to the option market.
For Netflix Inc, irrespective of whether the earnings move was up or down, if we waited two-days after the stock move, and then sold an one-month out of the money put spread, the results were simply staggering. We use two-days to allow the stock to fully reach equilibrium post earnings.
We can examine this intelligent approach, objectively, with a custom option back-test. Here is our earnings set-up:
Rules
* Open short put spread 2-days after earnings
* Close short put spread 29 days later
* Use the 30-day options
RETURNS
If we sold this out-of-the-money put spread in Netflix Inc (NASDAQ:NFLX) over the last three-years but only held it after earnings we get these results:
We see a 77% return, testing this over the last 12 earnings dates in Netflix Inc. That's a total of just 336 days (28 days for each earnings date, over 12 earnings dates).
We can also see that this strategy hasn't been a winner all the time, rather it has won 11 times and lost 1 times, for a 92% win-rate.
MORE TO IT THAN MEETS THE EYE
While a short put spread is a strategy that gains profits if the underlying stock "doesn't go down a lot," there is more to this with Netflix Inc.
What we're after with this approach is identifying companies that make their large stock move the day after earnings -- whether that's up or down -- and after that, find a sense of equilibrium in the stock price for the next month. This is what we find in Netflix Inc (NASDAQ:NFLX) .
WHAT HAPPENED
Traders that have a plan guess less. This is how people profit from the option market. Take a reasonable idea or hypothesis, test it, and apply lessons learned.
We hope, if nothing else, you have learned about Netflix Inc (NASDAQ:NFLX) and the intelligence and methodology of option trading and this idea of equilibrium right after earnings.
To see how to do this for any stock and for any strategy with just the click of a few buttons, we welcome you to watch this quick demonstration video:
Tap Here to See the Tools at Work
Thanks for reading.
Risk Disclosure
You should read the Characteristics and Risks of Standardized Options.
Past performance is not an indication of future results.
Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment.
Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.
Intelligent Options Trading: Right After Earnings in Netflix Inc (NASDAQ:NFLX)
Netflix Inc (NASDAQ:NFLX) : Intelligent Options Trading: Right After Earnings
Date Published: 2017-05-9Author: Ophir Gottlieb
LEDE
This is a simple option trade that starts two-days after Netflix Inc (NASDAQ:NFLX) earnings and lasts for the one month to follow, that has been a winner for 3 straight years.
Netflix Inc (NASDAQ:NFLX) Earnings
While the mainstream media likes to focus on the actual earnings move for a stock, that's the distraction when it comes to the option market.
For Netflix Inc, irrespective of whether the earnings move was up or down, if we waited two-days after the stock move, and then sold an one-month out of the money put spread, the results were simply staggering. We use two-days to allow the stock to fully reach equilibrium post earnings.
We can examine this intelligent approach, objectively, with a custom option back-test. Here is our earnings set-up:
Rules
* Open short put spread 2-days after earnings
* Close short put spread 29 days later
* Use the 30-day options
RETURNS
If we sold this out-of-the-money put spread in Netflix Inc (NASDAQ:NFLX) over the last three-years but only held it after earnings we get these results:
| Intelligent Short Put Spread | |||
| * Monthly Options | |||
| * Back-test length: three-years | |||
| * Open 2-days After Earnings | |||
| * Close 29-days Later | |||
| * Holding Period: 28-Days per Earnings | |||
| Winning Trades: | 11 | ||
| Losing Trades: | 1 | ||
| Post-Earnings Short Put Spread Return: | 77% | ||
| Annualized Return: | 84% | ||
We see a 77% return, testing this over the last 12 earnings dates in Netflix Inc. That's a total of just 336 days (28 days for each earnings date, over 12 earnings dates).
We can also see that this strategy hasn't been a winner all the time, rather it has won 11 times and lost 1 times, for a 92% win-rate.
MORE TO IT THAN MEETS THE EYE
While a short put spread is a strategy that gains profits if the underlying stock "doesn't go down a lot," there is more to this with Netflix Inc.
What we're after with this approach is identifying companies that make their large stock move the day after earnings -- whether that's up or down -- and after that, find a sense of equilibrium in the stock price for the next month. This is what we find in Netflix Inc (NASDAQ:NFLX) .
WHAT HAPPENED
Traders that have a plan guess less. This is how people profit from the option market. Take a reasonable idea or hypothesis, test it, and apply lessons learned.
We hope, if nothing else, you have learned about Netflix Inc (NASDAQ:NFLX) and the intelligence and methodology of option trading and this idea of equilibrium right after earnings.
To see how to do this for any stock and for any strategy with just the click of a few buttons, we welcome you to watch this quick demonstration video:
Tap Here to See the Tools at Work
Thanks for reading.
Risk Disclosure
You should read the Characteristics and Risks of Standardized Options.
Past performance is not an indication of future results.
Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment.
Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.