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heiasafari

Registered: Jul 2009
Posts: 249

07-22-12 07:34 PM

Good afternoon,

here is a spread I see in NFLX to play its earnings:

+1 jul27 72.5 PUT
-4 jul27 70.0 PUT
+3 aug17 60 PUT

I am putting links to the images so you can see better...

but it seems to pay minimum 8% as long as NFLX stays above 66.84, thats below the implied move (±11.75).

its a buffer of (66.84/81.82) -1 = -18.31%

graph @T0 (friday eod): http://screencast.com/t/xkVQJqxVii

graph @T+4 (assuming a drop in IV of 13): http://screencast.com/t/Wt56qrMC

Am I not seeing something?

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RichardRimes

Registered: Oct 2005
Posts: 2528

07-22-12 08:29 PM

pretty clever...how is the volume on the weekly's?

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heiasafari

Registered: Jul 2009
Posts: 249

07-22-12 08:39 PM

Quote from RichardRimes:

pretty clever...how is the volume on the weekly's?

liquidity is no problem, especially with earnings this week

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atticus

Registered: Mar 2007
Posts: 12633

07-22-12 08:47 PM

Looks decent. Is the $200 credit marketable?

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cdcaveman

Registered: Aug 2011
Posts: 3514

07-23-12 04:33 PM

how come i remember Netflix getting killed.. to much downside risk for me on this trade.. pretty girl turns ugly quick! who knows though that seems really good if your not worried about large downside risk.. is there a name for that spread.. Crashing butterfly? haha

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cdcaveman

Registered: Aug 2011
Posts: 3514

07-23-12 04:54 PM

you know another thing to look at is.. netflix i have seen move big time... you can put a ratio backspread and get a credit for betting on a big move down...
i can get a .20 cent credit right now for selling a 65 and buying 2 60's seems like a deal to me.. max risk 500 bucks.. collecting 20 bucks with a unlimited profit profile.. what do you think? combined with a butterfly?

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