When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Tech Alert - Netflix, Inc. (NFLX) – TAKE PROFITS
SELL – TAKE PROFITS Netflix, Inc. (NFLX) May 2021 $460-$465 in-the-money vertical BULL call spread at $4.86
Closing Trade
5-3-2021
expiration date: May 21, 2021
Portfolio weighting: 10%
Number of Contracts = 23 contracts
This was a short-term trade that streaming company Netflix, Inc. (NFLX) would stay above the strike price of $465 in the next 25 days.
NFLX opened up -.8% in the red, then out of nowhere, a huge buyer was the catalyst for the price surging past the $518 mark. I’ll take that quick bump to wrap up profits in this one.
We are at all-time highs in the Nasdaq and don’t want too much exposure in the tech portfolio going into expiration.
For readers, this is a great “buy the dip” candidate for any tech trader or investor.
Why did we buy NFLX?
NFLX nosedived over 9% on subscriber growth numbers that were far less than expected.
All the dip gave us investors is an optimal buying opportunity and bagging 7 awards at the Oscars meant this company can back up the quality it preaches.
The streaming giant's net addition of a little less than 4 million paying customers fell short of forecasts for 6.25 million new members. Some see this news as a sign that the pandemic-prompted swell of streaming sign-ups is all but over.
Largely lost in the noise of a membership shortfall, however, is that Netflix more than doubled its year-over-year profits. The first quarter's bottom line of $1.7 billion is a 140% improvement on net income of $700 million earned during the first quarter of 2020.
I mentioned this phenomenon in the tech letter of comparable metrics in the upcoming earnings quarter being difficult to surpass making the company look like they are failing.
These tech companies are not failing, much the opposite, there 2020 pandemic have made year-over-year number hard to top and I view a dip in Netflix as a great entry point for a short-term trade.
Profitability is going gangbusters at NFLX and this is a story that I still very much want to be a part of.
As the migration to digital increases throughout the developing world, Netflix's subscriber base will soar.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
If you don’t do options, hold the stock because my yearend target is $800.
Here are the specific trades you need to exit this position:
Sell to Close 23 May 2021 (NFLX) $460 calls at…………$58.48
Buy to Close 23 May 2021 (NFLX) $465 calls at………….$53.62
Net Proceeds:……………………............…….………..…….......$4.86
Profit: $4.86 - $4.35 = $.51
(23 X 100 X $.51) = $1,173 or 11.72%
If you are uncertain on how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
