Netflix (NFLX) PriceWatch Alert Down To $35.02 Break Even

Posted: Monday, July 06, 2009 8:07 AM EDT

Netflix (NasdaqNM: NFLX) closed yesterday at $39.92. So far the stock has hit a 52-week low of $17.90 and 52-week high of $50.24. Netflix stock has been showing support around 38.92 and resistance in the 41.50 range. Technical indicators for the stock are Bearish. NFLX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Sep '09 37.50 covered call (QNQ IZ) for a net debit in the $35.02 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 12.27% downside protection and a 7.08% assigned return rate for a 34.46% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the NFLX Jan '11 15 Call (OOJ AC) and selling the Sep '09 37.50 call (QNQ IZ) for a $20.40 debit. The trade has a 75 day life and would provide 11.32% downside protection and a 10.29% assigned return rate for a 50.00% annualized return rate (for comparison purposes only). Netflix does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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