Options traders are rolling out the red carpet for Netflix as it gears up to report earnings after the bell on Thursday.
The trades come as no surprise, considering how much the streaming giant has benefited from the stay-at-home trade.
Netflix has surged nearly 60% this year, breaking out to unprecedented new highs during the coronavirus pandemic as traders bet that more eyes than ever before are on what Netflix has to offer, both as a streaming platform and as a stock.
“[Netflix] has averaged [a move of] about 4.4% over the last eight quarters, but right now it’s implying a move of about $50 one way or the other. That’s 10% of the current stock price,” Optimize Advisors CIO Michael Khouw said Wednesday on “Fast Money.”
Wednesday’s activity was decidedly on the bullish side of that 10% implied move in either direction. Calls out-traded puts by 3 to 1, and the most active contract of the day pointed toward another big breakout to new highs.
“Some of the call action I was looking at were next week’s 520-calls,” said Khouw, “Those were trading for about $30. It looks like options traders may be targeting that $550 high we saw last week coming out of earnings.”
Those calls expire on July 24, and break even right around the $550 on the underlying stock. That’s nearly 7% from where Netflix was trading Thursday morning. That level would be slightly higher than Netflix’s all-time closing high of $548.73, but buyers of these calls are likely targeting an even larger breakout.
Netflix was trading about 1.5% lower in Thursday’s session at $515.67.