Unusual Options Activity In Netflix

When Netflix announced their second quarter earnings in July, the stock price crated to the downside more than $35. The reason price fell that much was because total streaming paid net additions came in at 2.7 million, below expectations of 5.06 million analysts expected. In addition, Netflix also lost 126,000 domestic paid subscribers versus an expected gain of 309,000. That was the first time in eight years Netflix lost U.S. streaming customers and missed targets for overseas subscribers.

Yesterday, Netflix announced their third quarter earnings. Wall Street was expecting another potential dismal earning because of soon to be competition from Apple and Disney.

According to a survey by the website Streaming Observer in partnership with data analysis firm Mindnet Analytics, as much as 14.5% of Netflix's current U.S. subscriber base of 60 million said they are considering canceling the service in order to sign up for Disney+. Apple's much-anticipated streaming service TV+ will cost just cost just $4.99 per month when it launches on Nov. 1.

The company added 6.77 million paid customers around the globe, topping the nearly 6.7 million analysts were expecting. Netflix ended the third quarter with 158.3 million paying subscribers worldwide, up 21% from a year ago. Lastly, Netflix earned $1.47 a share on sales of $5.24 billion in the third quarter. Analysts expected Netflix earnings of $1.05 a share on sales of $5.25 billion, according to Zacks Investment Research.

This news was good enough to send the stock price higher by $20+ after the Market closed as this was a stock to most. However, wasn’t not a shock to the Smart Money. Prior to the Market closing yesterday, the Smart Money bought close to 10,000 call options with a strike price at $302.50 that expire this Friday. Those options should have easily increased by 200% when the Market opens.

In addition, the Smart Money thinks Netflix isn’t done going up in price. The Smart Money also bought close to 9000 call options with a strike price at $325 that expire on 10/25.

Boy the Smart Money knows how to pick them as the $325 target is just below a major resistance/support line.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.