NFLX alternate trade

 

27 May

on options action tonight , Tony has a trade on NFLX . here is the link for the video clip

NFLX video clip

first off, im 50/50 that technical analysis even works. seems to have as many false positives as correct ones or at best a self fulfilling prophecy.. since TA is putting human nature into a graphical picture, IMO the time frame you are referencing should make sense. ie.. going back 5 years on a chart looking for resistance i dont think makes sense.. in other words , is the expectation that a crowd of people bought 5 years ago.. held all the way higher and now after all that time will sell at 240 to get their money back? seems unlikely

my timeframe does not paint such an optimistic picture . i see 2 big gaps down from earnings and still in general downtrend. if your thesis is its-so-bad-its-good, or you just want to take a shot thats something else. Tony comes up with in my opinion and overly complicated partially in the money credit put spread, collecting about $7 ($700).. as stock moves higher that amount decreases and you take profits by buying back cheaper. 

Instead, if for some reason you "wanted to take a shot" here id go with something more straight forward while allow for an additional 30 points of downside if you get the direction wrong... a call spread risk reversal.. using same July Opex:

Sell the July 160 Put to help pay for:

Buy the 195/205 call spread -- midpoint now is debit about $1.00 .

max profit is $10, the width of the call spread, max loss the $1 debit if stock is above 160 at opex. below 160 at opex and without trade management you will be "put the stock"

note that at 160, Tonys trade is at max loss 

i picked the 160 level for it being below even the low on 12may

Alternative to Tony's $TSLA trade

 

22may

below is the video clip from Options Action from Tony on TSLA :

TSLA trade 

Tony is offering a Jun 620/600 put spread for about $7.80 but acknowledging that could get lower based on where stock closed near 665

Two ways to look at this trade. first as a straight up stand alone trade that stock moving lower or second that its a downside hedge.

keeping in mind that the stock does not actually need to get to 600 for the spread to be profitable but also the stock DOES need to get to 600 or lower at opex to get that max profit. 

with stock at 665 and the implication that its moving lower my issue with the trade is that at opex the stock could be 5% + lower but this put spread has not gained. as in if it closes above 620 the spread will expire worthless and you have not made money as a directional trade nor has it giving you anything it it was a hedge. 

My suggestion if you are using this trade as a hedge to further downside is to adjust the strikes higher to get the protection right away vs waiting for a further 5% down move before it kicks in. using tony's percentages.. its a 20point wide spread and paying between $6-$7 is about 30% of the cost of the width.. give or take.

instead, buy the Jun 660/600 put spread. mid point is about $22.50.. nearly 1/3rd the price of spread for the 60point wide spread. But the protection kicks in right away if stock moves lower.

downside of course is the higher price but compare if you entered the 620/600 you would lose 45points before any protection kicked in. 

Both spreads will make money if the stock is below 600 but id rather have some protection between 665 and 620 also. 

If you are an advanced trader and have enough buying power, in order to reduce some of the cost of that protection (the $2250) , consider selling some upside call spreads to help offset. The Jun 800/810 is midpoint $1.60 credit now, selling a 5 lot there brings in $800 to help pay for the protection.