Netflix Option Trade

Netflix will report earnings today after the market closes and the stock is trading around $131. Analysts have been upgrading the stock and they have beat international subscriber growth for 10 of the last 12 quarters. If they guide lower future growth or earnings the stock will pull back, but considering the investment they are making in original content we see a low probability that the stock drops 10%+ after they report today.

We are selling the March $100 Puts on NFLX at $0.80 cents, which expire in 58 days. If the stock drops below $99.20, we would be forced to buy the stock at $100, or we would buy back the Puts at a loss. If the stock rallys after the close, or drops but stays above $125, we will see the March $100 Puts come down in value since the volatility of earnings will have passed, and we should still have a profit by tomorrow. The plan is to let these options expire and to pocket the full $80 per contract as long as the stock doesn't melt down this evening after hours.

Update as of 2:58pm Eastern Time:
We added a new position on the Netflix trade as follows:
Bought June 2017 $145 Calls for $8.45
Sold June 2017 $100 Puts for $3.05
Sold June 2017 $160 Calls for $4.46
Net cost of the trade is $0.94, or $94 per set of options for a synthetic long position on the stock. We put this on in addition to being short the March $100 Puts for additional exposure to the long side in reaction to earnings this evening.