This morning Netflix (NFLX) was downgraded from a buy to a hold by Needham. With the stock at $93.95 I just sold a Naked Call. I sold 10 contracts of the NFLX 7/8/16 $95.50 Naked Calls and brought in a premium of $1.05 ($1050). With the market closed yesterday, this is a 4 day play. This trade fits into my “1 Week/1 %” strategy. This trade, if it plays out as planned, will bring in a Rate of Return of 1.1% for 4 days. This is a great return but I give this trade a Risk Factor of 5. This is a risky trade because it’s a Naked Call on a very volatile stock. I feel OK about the risk because the stock was downgraded and I don’t think the market’s going to move too much this week. There’s just too much going on in the world right now. However, I will be watching this position and the market very closely. What makes NFLX a little more dangerous than other stocks with Naked Calls is NFLX can have a $3 pop at any time. Here’s the sell order:
Sell to Open 10 NFLX 7/8/16 $95.50 C @ $1.05 (+$1050)
I hope everyone had a great July 4th weekend!
Steve
The Options Coach