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(UPDATE) out @8.86, 1/27/2011. Good enough.
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IF the after-hour price ($202) holds tomorrow morning, that is.
After betting against Goldman on ISRG paid off big time, I was looking to put NFLX. It has had a phenomenal run, probably due for a decent-size correction. Their earning report on Wednesday AH seemed like a good enough trigger for that correction.
Then I read analysts' comments, and that changed my mind. They were almost all negative. I looked at the front-month options - more puts bought than calls. Then I looked at the chart. It wasn't great, with a recent correction, but I didn't see a negative divergence on technical indicators. The stock seemed to be building a base for about two months (ignoring a bump in mid January), as it worked off the MACD negative divergence from October to November.
Suppose it is a base that NFLX has been forming, and what would be the target price? I figured $205, to complete the right side of a cup. It if were to break out from the cup, the ultimate target would be $230 (cup depth plus breakout point). February 210 calls were selling under $3. I bought one at $2.84. All I would lose would be $2.84 x 100.
Barring unforseen disaster, it looks like I'll get my money back with some bonus.
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