On Monday prior to its earnings report, the options market had been pricing in a large move for Netflix?Inc.’s (NFLX)?stock.?
As traders sought protectection against big swings, the costs were high and not a lot of investors had been willing to do so, reported the Wall Street Journal. Bets had been made in either direction (via a straddle) that Netflix could move around?12%. This represented six-plus times Netflix’s average daily 1.8% change in both directions to date.?
Historically, Netflix has endured moves after it quarterly reports. Its average jump change after its four previous reports is 15%. For its fourth quarter report on Jan. 22, there was a 20% jump in the week with a 23% rally after 2013’s first quarter numbers on April 22, 2013.
Andrew Wilkinson, chief market analyst at Interactive Brokers, said via WSJ,??The basic message is, people are putting their seat buckle on in preparation of a wild ride.?
Options volumes had not been heavy and on Monday, according to Trade Alert, NFLX options were the sixth most actively traded as?150,902 contracts exchanged hands (55.5% calls and 44.5% puts).
The underlying closed at $348.49, up $2.75 (0.80). On March 4, it ended the day at a record $454.98 close and has since fallen 24%.?
After the bell, Netflix reported a first-quarter profit of $53 million (86 cents a share) with $1.27 billion in revenue. Compared to the same period last year, Netflix earned 5 cents a share from $1.02 billion in sales. Analysts has estimated 81 cents a share earnings with revenue of $1.27 billion. The company said 2.25 million U.S. video-streaming subscribers had been added last quarter, reported MarketWatch.
Following the report, Netflix’s after-hours trading had shares up $23.81 (6.84%) to $372 per share. ?