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Stocks : Big Moves in Netflix Shares Expected

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01/17/2020 | 02:48am EST

By Gunjan Banerji

Options traders are forecasting a large swing for Netflix Inc. shares after the streaming-video company reports results next week.

They are projecting up to a 7.7% move after the company reports earnings on Tuesday, according to data provider Trade Alert. That is above the average 6% move recorded after the last eight earnings releases.

The forecast is based on an options trade called a "straddle" that entails buying both bullish and bearish options contracts that allow investors to buy or sell stock at a specific price. The projection is based on the size of the swing rather than the direction.

Netflix tends to be volatile after its earnings reports as investors closely parse its latest financial figures on new subscribers and pace of growth around the world.

Recently, competition among streaming companies has heated up. Walt Disney Co. is focusing efforts on its own streaming service. Comcast Corp.'s NBCUniversal just unveiled its own streaming platform and AT&T Inc.'s WarnerMedia is expected to launch its platform in May.

The company's shares have advanced this year, as the FANG trade of buying hot technology stocks such as Facebook Inc., Amazon.com Inc., Netflix and Google parent Alphabet Inc. has continued to pay off for investors. Netflix shares have risen 4.7% in January to Thursday's close of $338.62.

Some investors were making short-term bets this week ahead of earnings. Some of the most actively traded options contracts on Thursday were call options tied to the shares jumping to $340 or $350 through the end of this week, according to Trade Alert. Calls give the right to buy stock at a specific price, later in time. One popular trade this week involved buying bullish call options tied to the shares hitting $380 after earnings, Trade Alert data show.

Corrections & Amplifications Comcast Corp.'s NBCUniversal just unveiled its own streaming platform and AT&T Inc.'s WarnerMedia is expected to launch its platform in May. An earlier version of this article incorrectly stated that both companies' platforms would be unveiled next year. (Jan. 16)

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
NETFLIX, INC. -0.05% 386 Delayed Quote.19.35%
S&P 500 -0.38% 3373.23 Delayed Quote.4.81%
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