Finding Opportunity in NFLX Options Chain
This week has seen the inception of new options for the April 19th expiration to Netflix Inc (Symbol: NFLX). The time value of an option buyer is crucial in dictating the price they are willing to pay. The 93 days until expiration for these new contracts provides an opportunity for sellers of puts or calls to potentially achieve a higher premium than the contracts with a closer expiration date.
Put Contract Analysis
The put contract at the $475.00 strike price holds a current bid of $31.60. Should an investor choose to sell-to-open that put contract, they are committing to purchase the stock at $475.00. However, they will also collect the premium, setting the cost basis of the shares at $443.40 (before broker commissions). This could offer an enticing alternative to acquiring NFLX shares at $477.62/share today.
Selling the $475.00 strike put contract represents an approximate 1% discount to the current trading stock price, making it out-of-the-money by that percentage. Consequently, there’s the likelihood that the put contract would expire worthless. Based on current analytical data, the odds of this happening sit at 56%. Tracking these odds over time will reveal how they change, with the potential to publish a chart of the numbers on the website under the contract detail page for this contract. An expiration leading to worthlessness for the put contract would present the premium as a 6.65% return on the cash commitment, or 26.12% annualized – a metric referred to as the YieldBoost at Stock Options Channel.
Call Contract Analysis
On the calls side, the call contract at the $490.00 strike price possesses a current bid of $32.55. If an investor were to purchase shares of NFLX stock at the current price of $477.62/share and then sell-to-open that call contract as a “covered call,” they would be committing to sell the stock at $490.00. The call seller will also collect the premium, setting a total return (excluding dividends, if any) of 9.41% if the stock gets called away at the April 19th expiration (before broker commissions).
The $490.00 strike represents an approximate 3% premium to the current trading stock price, placing it out-of-the-money by that percentage. Consequently, there’s a possibility that the covered call contract would expire worthless, with the current odds of that happening estimated at 49%. Monitoring these odds over time and publishing a chart of the numbers is a potential activity for Stock Options Channel, in addition to charting the trading history of the option contract. An expiration leading to worthlessness for the covered call contract would present the premium as a 6.82% boost of extra return to the investor, or 26.76% annualized, referred to as the YieldBoost.
The implied volatility in the put contract is at 38%, while the call contract has an implied volatility of 37%. When considering the actual trailing twelve month volatility, calculated using the last 251 trading day closing values along with today’s price of $477.62, it is at 37%. For more put and call options contract ideas worth exploring, visit StockOptionsChannel.com.
Conclusion
The unveiling of new options for the April 19th expiration offers a compelling opportunity for investors in Netflix Inc. As these new contracts hold the potential for higher premiums, sellers of puts or calls could capitalize on the time value, given the 93 days until expiration. Monitoring the evolving odds and implied volatility along with a historical context can guide strategic decision-making for investors.
