Disclaimer: The information found on this site is meant for educational and informational purposes only. Nothing on this site should be construed as a recommendation or solicitation to buy or sell derivatives or securities or to trade any particular strategy. Trading of derivatives or securities has large potential risk and you must be aware of and accept all the risks. Past performance of any trading system or methodology is not necessarily indicative of future results. No representation is being made that any account will or is likely to achieve performance results similar to those discussed on this website. Hypothetical or simulated performance results have certain limitations and do not represent actual trading.
Tuesday, June 22, 2010
NFLX Sell Signal?
-NFLX fell 5.9% yesterday to close at 118.99 without any significant news. The stock drop may have been due to simple profits taking on overbought situation. It seems foolish to be bearish on NFLX on just technical sell signal, but CSTR, another high flying stock of late is breaking down, again without any negative news reported.
- Whenever P&F Indicator changes, it's a signal that the stock price is likely to move away from the current price and/or stock price may show high intraday volatility within the next several days. There are a few ways to play this indicator. I could buy July $120 straddle and scalp gamma or bet on a call or put spread buying $120 call/put and selling either higher strike call/lower strike put, depending on your view of probable short-term direction of the stock.
- Volatility in July is a bit high, especially considering the July 4th holiday weekend, but if NFLX price drops below $114.7, we could see a stock price drop to $105 easily, again purely on technical stock price movement.
-I recommend buying the July 120/110 put spread for $4.10 or under, current stock price is $118.77 and spread mid market is around $4.0.