Unlocked: Netflix and Goldman Sachs Earnings Trades

• Posted by Greg Harmon
• on April 15th, 2015

This is what I laid out for premium subscribers earlier today. I took Goldman Sachs trade #5 but moved the strikes up to 205. Netflix is looking great early….

You can join for just $199 for 3 months, or $618 for a year and I’ll throw in a signed copy of my book. Just one contract in the Netflix trade would have paid for the annual 3 times already.

Two names today, one that reports after the close tonight, Netflix, $NFLX, and one before the open Thursday, Goldman Sachs, $GS.

Netflix, $NFLX

Netflix, $NFLX, is at resistance at 485 into earnings, this time from a higher low. A continuation higher would target 575 on a Measured Move. Heading into earnings the RSI is bullish, while the MACD is rising. There is support lower at 468 and 408 followed by 393 and 351 before 316. There is resistance above at 486 and then free air. The reaction to the last 6 earnings reports has been a move of about 12.32% on average or $60 making for an expected range of 415 to 540. The at-the money April Straddles suggest a smaller $44.50 move by Expiry with Implied Volatility at 124% above the May at 51%. Short interest is moderate at 9%. Open interest is largest at the 480 Strike but sizable from 400 to 530.

Trade Idea 1: Buy the April 480/500 Call Spread for $8.

Trade Idea 2: Buy the April 480/500/520 Call Butterfly for $3.00.

Trade Idea 3: Buy the April 490/510 Call Spread and sell the April 435 Put for a $1 credit.

Trade Idea 4: Buy the May 490/520 Call Spread and sell the May 420 Put for free.

#1, #2 and #3 give the short term upside. #3 and #4 give the upside but using margin with the short puts. #4 is best for the longer term. I prefer #3 or #4 but without margin the call spread.

Goldman Sachs, $GS

Goldman Sachs, $GS, has been moving between 172 and 198 since August. The price action since February has been strong, moving towards the top of the channel and peaking above it into earnings. The RSI is bullish and rising and the MACD going up as well. There is support lower at 193 and 191 followed by 187.50 and 182.75. There is no resistance higher over 198. The reaction to the last 6 earnings reports has been a move of about 1.52% on average or $3.00 making for an expected range of 194.50 and 201. The at-the money April Straddles suggest a larger $4.60 move by Expiry with Implied Volatility at 33% above the May at 18%. Short interest is low at 1.4%. Open interest favors the 200 Strike in April but there is good open interest at 195 and 190 as well.

Trade Idea 1: Buy the April 197.5/200 Call Spread for $1.45

Trade Idea 2: Buy the April 197.5/200 1×2 Call Spread for a 20 cent credit.

Trade Idea 3: Buy the April 195/192.5 Put Spread for $0.50.

Trade Idea 4: Buy the April 195/192.5 1×2 Put Spread for free.

Trade Idea 5: Buy the April/May 200 Call Calendar for $2.00.

Trade Idea 6: Sell the April/May 190 Put Calendar for a $1.10 credit.

Trade Idea 7: Sell the April 195/200 Strangle for a $2.50 credit

#1 and #2 look for a move higher but not above 200 in April while #3 and #4 give short term downside. #5 gives the long term upside looking for 200 to hold it this month while #6 reduces the cost and gives short term protection to 190. #7 gives a good range, profitable from 192.50 to 202.50. I like #2 for the upside short term, and #5 with #6 for the long term upside.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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