12:25pm (EST)
We mentioned this week would produce some nice earnings trades and one we failed to capitalize on was Netflix (NFLX, $142.82, up $39.56) which is up a whopping 38% today. The company did the exact opposite of Wall Street expected as they reported a profit of 13 cents versus expectations for a loss of 13 pennies.
We had a feeling the company would “survive” considering the deal they recently signed with Disney (DIS, $54.60, up $0.65) which was huge. Netflix has a solid brand name and despite some stumbles, there is some value in the shares.
As cable companies continue to raise prices and provide crummy service, customers are looking for ways to reduce their cable bill or slash them entirely. Verizon (VZ, $42.83, up $0.04) charges an incredible amount of money to use their cable, phone (home and mobile), and internet services. There are so many hidden fees attached to your cable bill that it becomes a headache to figure it out. They charge monthly fees for the cable boxes and they don’t offer the best phone rates as many carriers are a lot cheaper. Customers are paying north of 4 bills to have all of Verizon’s bells and whistles with a phone and data plan.
This is where Netflix comes in. As people move away from traditional cable companies and switch to alternative methods, content will be key as well as pricing. Netflix is $8 or $16 a month an offers a ton of viewing choices. The company is expanding globally but now managing that growth in a better way and their partnerships continue to impress. Shares are still a little lofty at these levels but with so many downgrades and lowered expectations, we should have swung the bat on a cheap call option trade.
The Netflix February 130 calls (NFLX130216C00130000, $14.55, up $13.60) closed at 95 cents yesterday after OPENING at 34 cents and are up a whopping 1,431% today. In other words, a $1,000 investment would be worth a cool $14,550 at the present moment.
There are WEEKLY options available to trade on Netflix and the January 125 calls (NFLX130125C00125000, $16.40, up $16.02) closed at 38 cents yesterday after opening at 16 cents and are up an astounding 4,215% on today’s news. A $380 trade on 10 contracts would have yielded a profit for $16,400!
Now you know why we say earnings season can produce some incredible option returns.
As far as the market, the bulls are flexing their muscles despite Apple’s (AAPL, $460.32, down $53.69) drubbing. The Dow is surging 85 points to 13,862 while the S&P 500 is up a nickel to 1,500. The Nasdaq is down a six-pack to 3,147. Incredible.
We do have more good news for a few of our current trades and we are locking in profits on one that showing a gain of nearly 60%. We said the bulls could run through the first of February and we are looking to ring the register along the way.
Subscribers, check the Members Area for the updates.
Special Reminder: We were stopped out of our Antares Pharma $4.00, flat) covered call trade for the Weekly Wrap. We made single-digits on the trade and we could have written another call option to get the returns to double-digits but we felt it was best to move our money into some faster moving trades. This gets out Track Record for the Weekly Wrap to 46-2 since inception. We will have a special story for you tomorrow on the Weekly Wrap so make sure you read up on it.
