Stock / Symbol: [private_monthly]Netflix/ NFLX[/private_monthly]
Option Strategy: bull put spread
Price at trade post: $178.15
Max Profit: $300
Max Risk: $700
Max Return: 42.86%
Profit Range: $163.50 +
Max Profit at: $165 +
Reasoning: We're looking to take advantage of what we believe is a short term sell off in this stock. With premiums rising due to a volatility increase, we're looking to sell a put spread. This trade takes full advantage of the 77% option expiration rule and, according to our OptionsXpress risk graph, has a 65% probability of success. Additionally, with a break even at $163.50, we have an 8% downside cushion.
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Trade Details:
Buy 2 NFLX Jan11 160 Puts @ $4.75 = $950.00
Sell -2 NFLX Jan11 165 Puts @ $6.25 = ($1,250.00)
for a net credit of $1.50 per contract
Requirements:
Cost/Proceeds ($300.00)
Option Requirement $1,000.00
Total Requirements $700.00
Estimated Commission $12.95
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Chart:
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