Strategic Mindset: Market looks like it is getting ready for a correction. IV and price movement could increase. At Top Gun Options we've found a nice earnings target that fits our strategic mindset.
Target: NFLX Trading @ $109.97
Commit Criteria: (NASDAQ:NFLX) Implied Volatility should be rising as NFLX approaches its earnings announcement on April 23rd. We will attempt to ride this increase using a straddle on the May expiration options. NFLX IV is low, giving us nice support for this trade and reducing overall risks. The market dropped yesterday, possibly giving sign of some more movement in the near future.
Tactic: OPENING 3 NFLX MAY 105/120 Strangle @ $13.48 Debit
· Buying to Open 3 NFLX May 105 Puts
· Buying to Open 3 NFLX May 120 Calls
· As a Strangle
· For a net debit of $13.38 (3 @ $1338 for a total of $4,044.00)
· Maximum Gain: Unlimited
· Maximum Loss: $4,044.00 max
Mid-Course Guidance: We will be watching for a IV changes and major price movements in NFLX as we get closer to the earnings announcement on 4/23.
Profitability Target: We would like this trade to go up 30% to a position price of $17.52.
Stop Loss of 25% - a position price of $10.11
Profit Target of 30% - a position Price of $17.52
Time Exit - Do not hold this position over the earnings announcement. In all cases exit before the end of trading on 4/23