NFLX – Netflix, Inc. – Analysts at JPMorgan raised their target share price on Netflix to $133 from $110 today sending the provider of DVD-rental-by-mail service soaring 5.05% higher to $115.91 as of 1:08 pm (ET). Earlier shares surged 6.83% to touch an intraday high of $117.87, which is just $1.63 below the stock’s current 52-week high of $119.50 attained back on May 13, 2010. Options traders littered Netflix with various bullish strategies to position for continued appreciation in the price of the underlying shares. Near-term optimists purchased 1,200 calls at the June $120 strike for an average premium of $2.48 apiece. Call buyers at this strike price profit only if NFLX shares rally above the average breakeven point to the upside at $122.48 by June expiration. Other bullish individuals sold 2,100 puts at the June $110 strike for a premium of $3.20 per contract. Put sellers keep the premium received on the trade if shares trade above $110.00 through expiration day. Investors short the puts are apparently happy to have shares of the underlying stock put to them at an effective price of $106.80 in the event that Netflix shares slip and the puts land in-the-money at expiration. Finally, medium-term bullishness took the form of a debit call spread in the September contract. One trader picked up 2,100 in-the-money calls at the September $115 strike at an average premium of $16.19 each, and sold the same number of calls at the higher September $125 strike for an average premium of $11.47 a-pop. The net cost of the debit call spread amounts to $4.72 per contract. Therefore, the investor responsible for the transaction stands ready to accrue maximum potential profits of $5.28 per contract as long as Netflix shares jump 7.85% over the current price of $115.91 to exceed $125.00 ahead of expiration day in September.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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