10/22/2013 Tues

Netflix Inc.                          NASDAQ: NFLX

    With much of the controversy behind them and the new business plan apparently working well for the company, the stock looks poised for a short cover rally, especially going in to year end. Subscribers are up and so are revenues, which now top $1 billion. The company seems to be gearing up to position itself as yet another "channel" on your cable TV box, with the added benefit of their entire streaming content.

      I would wait and see where the stock and IV settle in tomorrow. With that said look at selling the front month Nov calls and buying the Dec call on a diagonal selling the Nov 420 call and buying the Dec 425 call provided the vol differential is still 15% or more in your favor. If not, look at a call vertical in Dec around the 425 strike. Short covering coupled with portfolio managers and hedge funds could see the stock soar.

    Notice the volume on the Dec 450 calls was around 3,000 traded on Monday and the Nov 350, 400, 450 and 490 calls all traded heavy volume as well, which suggest more upside to come.

Even the Dec 450/470 long vertical seems attractive at around the 1.50 range great risk reward in a market where many stocks have substantial gains and having trouble supporting their prices as we saw with both ISRG and IBM.

Avg Volume 3,257,000

IV       Nov Monthly’s 72%      Dec Monthly’s 56.60%     Jan Monthly’s 53.30%

EARNINGS ESTIMATES

	Current Qtr  (09/2013)	Next Qtr  (12/2013)	Current Year  (12/2013)	Next Year  (12/2014)
Average Estimate	0.48	0.47	1.56	3.35
Number of Estimates	19	19	16	21
Low Estimate	0.39	0.20	1.29	1.70
High Estimate	0.61	0.88	2.24	NA
Year Ago EPS	0.13	0.13	0.29	1.56
EPS Growth	272.87%	261.94%	436.42%	115.47%

*Disclaimer: This is not a recommendation. All trading entails risk. Anyone employing any strategies and having limited knowledge of options trading should consult with a FINRA licensed professional.