Netflix Earnings
Netflix stock is trending bullish
Netflix releases quarterly earnings tomorrow after market close. From Zacks Consensus Estimate
“This internet video service is expected to post quarterly earnings of $2.57 per share in its upcoming report, which represents a year-over-year change of +47.7%. Revenues are expected to be $7.48 billion, up 16.3% from the year-ago quarter.”
The Netflix stock is currently trending bullish with a return of +7.7% over 1 month. YTD it is up +17.4% which is strangely lower than what the markets have returned. The S&P 500 has returned +19% and the NASDAQ +18%.
I am assessing the options to see whether there are some good risk-reward opportunities to play the earnings event. From Market Chameleon I note that
“The options market overestimated NFLX stocks earnings move 75% of the time in the last 12 quarters. The predicted move after earnings announcement was ±8.2% on average vs an average of the actual earnings moves of 5.9% (in absolute terms).”
The Options AI website is currently predicting NFLX to move between 600-660 post release which is about ~4.8% up or down from current levels. The last 4 moves post earnings release were:
Oct 20 - 21, 2020: -6.92%
Jan 19 - 20, 2021: +16.85%
Apr 20 - 21, 2021: -7.4%
Jul 20 - 21, 2021: -3.28%
So, our assessment data points are:
NFLX is trending bullish up +7% in 1 month
This quarter expected move is ~4.8%
Normal expected move is ~8.2%
Maximum move over the last year was ~17%
The decisions are:
I will not bet against the trend meaning I will sell put spreads (bullish move)
I will stay at least 8% out of the money and perhaps go with 10% just to be safe
Trade the weekly expiration options so just playing the earnings event
Create iron condor with minimum risk, if premium makes sense
OK, I am ready for tomorrow.