Netflix (NFLX) 11/16/09 PriceWatch Alert Up To 21.66% Return

Posted: Monday, November 16, 2009 8:45 AM EDT
By: Market Intelligence Center Staff

Netflix (NasdaqNM: NFLX) ended the last trading session at $59.33. So far the stock has hit a 52-week low of $18.23 and 52-week high of $59.89. Netflix stock has been showing support around 56.88 and resistance in the 60.62 range. Technical indicators for the stock are Bullish. NFLX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Mar '10 55 covered call (QNQ CK) for a net debit in the $51.23 area. That is also the break even stock price for this trade. This covered call has a 124 day duration, provides 13.65% downside protection and a 7.36% assigned return rate for a 21.66% 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 25 Call (OOJ AE) and selling the Mar '10 55 call (QNQ CK) for a $26.00 debit. The trade has a 124 day life and would provide 14.04% downside protection and a 15.38% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). Netflix does not pay dividends at this time. [ABR-Seven Summits Research]