NFLX Low Risk Short Position
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NFLX has been trading in a range for many months, as we can see by this weekly chart here:
Stochastics on the daily chart are showing it as heavily overbought, with an RSI of about 85, likely in anticipation of earnings which come out in 6 days. Historically, NFLX sells off about 80% of the time post earnings, usually quite steeply, with an average sell-off of between $50-60 dollars within the week that follows earnings.
Here's a daily chart with stochastics visible:
Barring a few temporary outlying moves to the outer extremities of its range, I believe NFLX will either:
1) Push up towards and then reject at the $566 level and then retrace back down towards $515.00 post earnings.
2) Falter post earnings and retrace to more "typical" RSI and stochastic levels prior to earning hitting.
3) (Hopefully not) push outside its trading range (difficult to imagine this scenario actually happening) and form new highs above its existing range.
I am currently in an Iron Condor on NFLX with 570 and 490 short strikes. It is leaning bearish at the moment, but a move back down downwards 515 and a crush of implied volatility will substantially help my position. I believe both are likely to happen in the current market environment.
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If you were to enter NFLX short, you might consider it around the $566 level, assuming it pushes that high. You could accomplish this with a call credit spread which would give you the benefit of IV crush, assuming volatility decreases (which it would, if the price fell off steeply.)
You could also take a bearish debit spread, but that will struggle with volatility collapse as it's a BTO position.
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Whatever happens, I'll be curious to watch NFLX as it develops. I do not think it's current price behavior is sustainable.
Stochastics on the daily chart are showing it as heavily overbought, with an RSI of about 85, likely in anticipation of earnings which come out in 6 days. Historically, NFLX sells off about 80% of the time post earnings, usually quite steeply, with an average sell-off of between $50-60 dollars within the week that follows earnings.
Here's a daily chart with stochastics visible:
Barring a few temporary outlying moves to the outer extremities of its range, I believe NFLX will either:
1) Push up towards and then reject at the $566 level and then retrace back down towards $515.00 post earnings.
2) Falter post earnings and retrace to more "typical" RSI and stochastic levels prior to earning hitting.
3) (Hopefully not) push outside its trading range (difficult to imagine this scenario actually happening) and form new highs above its existing range.
I am currently in an Iron Condor on NFLX with 570 and 490 short strikes. It is leaning bearish at the moment, but a move back down downwards 515 and a crush of implied volatility will substantially help my position. I believe both are likely to happen in the current market environment.
--------------
If you were to enter NFLX short, you might consider it around the $566 level, assuming it pushes that high. You could accomplish this with a call credit spread which would give you the benefit of IV crush, assuming volatility decreases (which it would, if the price fell off steeply.)
You could also take a bearish debit spread, but that will struggle with volatility collapse as it's a BTO position.
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Whatever happens, I'll be curious to watch NFLX as it develops. I do not think it's current price behavior is sustainable.
Nota
Trade is going fabulously. Rejected at 566 to the penny. Waiting on post-earnings drop.
Check out this trade and more like it on my YouTube channel where I avoid hype and just outline solid technical ideas. Some work, some don't, either way, I review how they went.
youtube.com/channel/UCF4pjcHPCJDwJB29_e1dP_A
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