NFLX reported earnings just a couple of days ago and for a stock that tends to experience big moves after earnings, it was a very quiet affair.
The stock opened basically flat and ended the day down only 2.9%.
Leading into earnings, the options market was pricing an 11.8%. Any trader that was brave enough to sell the straddle made a handsome profit given the actual move was so much smaller than expected.
Here’s how the short straddle looked the day before the announcement.
And here’s how the trade looked at the end of the following day:
I’ve talked in the past about the post earnings volatility crush on NFLX and here was another great example. Look at how the implied volatility has dropped from 145% before earnings to 67% after earnings.
Well done to anyone that was brave enough to sell the straddle.
Looking at the past few, NFLX has generally moved less than the expected move so the straddle sellers have definitely been winning the battle lately. Will that continue next quarter? What do you think?.
Trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
