Exploring Intriguing NFLX Options Strategies for May 16th: Puts and Calls Insights

Published On: January 15, 2025 1:38 pm

New Trading Options for Netflix Investors: May 16th Expiration Opportunities

Investors in Netflix Inc (Symbol: NFLX) have new options available for trading, set to expire on May 16th. With 121 days until expiration, these contracts provide a chance for options sellers to earn higher premiums compared to those expiring sooner.

Examining the Put Contract

The put contract at an $840.00 strike price currently has a bid of $63.00. If an investor sells this put contract, they agree to buy the stock at $840.00 while collecting the premium. This means their effective cost basis for the shares drops to $777.00 (before broker commissions). For someone looking to buy NFLX shares, this could be a more enticing option than paying the current price of $845.72 per share.

This strike price represents about a 1% discount from the current trading price, making it out-of-the-money by that margin. There is a 57% chance that this put contract may expire worthless, suggesting that it may not need to be exercised. If it expires worthless, the premium would yield a 7.50% return on the cash commitment, translating to a 22.63% annualized rate — a concept referred to as the YieldBoost. Stock Options Channel will monitor these figures over time and publish updates.

Reviewing the Call Contract

On the call side, the contract at the $860.00 strike price has a current bid of $67.70. An investor buying NFLX shares at $845.72 and then selling this call contract as a covered call would commit to selling the stock at $860.00. Including the premium collected, this could yield a total return of 9.69% if the stock is called away by the May expiration (excluding brokerage fees). However, should NFLX shares rise significantly, the investor may miss out on additional gains.

The $860.00 strike is around 2% higher than the current trading price, implying that there is a 47% chance this covered call could also expire worthless. If it does, the investor retains both the shares and the premium. The expired premium would provide an 8.01% additional return or 24.16% annualized, contributing another YieldBoost.

Understanding Volatility

Both the implied volatility for the put and call contracts stands at approximately 38%. Meanwhile, the actual trailing volatility calculated from the last 251 trading days, along with today’s stock price of $845.72, is around 29%. For more contract ideas, StockOptionsChannel.com offers additional resources.

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