To The Moon

$Netflix(NFLX)$ ended 2024 on a high note with two NFL football games, a halftime show by Beyonce, and the return of hit series "Squid Game." But Netflix stock was tackled for a loss to start 2025. Investors are hoping the streaming video leader can get back on track with its quarterly earnings report next week. The Los Gatos, Calif.-based company will report its fourth-quarter results late Tuesday. Earnings Estimates & Analysts Opinions Analysts polled by FactSet expect Netflix to earn $4.20 a share on sales of $10.12 billion in the quarter ended Dec. 31. In the year-earlier period, Netflix earned $2.11 a share on sales of $8.83 billion. Wall Street is looking for Netflix to add 8.2 million new subscribers worldwide in the fourth quarter, for a total of 290.9 million. Rosenblatt analyst Barton Crockett predicted that the platform's growth in sports could drive upside to subscribers in the fourth quarter versus guidance. While things could look good in next week's earnings report, Crockett is cautious on the first-quarter guidance and future results. "Netflix will lose the NFL ad lift in the 1Q25. Some subs that joined for the NFL Christmasgames or Paul/Tyson fight could churn off." Wedbush Securities analyst Alicia Reese maintained her outperform rating on Netflix stock with a price target of $950. "Netflix has established a virtually insurmountable lead in the streaming wars," Reese said in a note to clients. "Netflix can retain its moat while competitors try to replicate its business model." In 2024, Netflix stock surged 83%. So far this year, through Thursday's close, Netflix stock is down 5.49% to $842.37. Here are some options strategies if you want to trade Netflix’s earnings: 1. Bull Call Spread When to use: You expect Netflix to rise moderately after earnings but don’t expect it to skyrocket. This strategy is ideal for a controlled bullish bet with defined risk and reward. How it works: You buy a call option at a lower strike price and sell a call option at a higher strike price, both with the same expiration date. Example: Buy 1 NFLX 830 Call (current price) Sell 1 NFLX 870 Call $NFLX Custom 250124 830.0C/870.0P$ Pros: Limits both potential profit and loss. Lower cost compared to buying a naked call since the premium from selling the call offsets the cost of buying the lower strike call. Cons: Your profit is capped at the difference between the strike prices minus the net premium paid. You won't fully participate in any large upside move beyond the 870 strike price. 2. Sell Put (Cash-Secured Put) When to use: You are bullish on Netflix but would be willing to buy it at a lower price. This strategy allows you to potentially acquire the stock at a discount while collecting premium income in the meantime. How it works: You sell a put option at a strike price below the current market price. You will be required to buy Netflix at that strike price if the stock falls below that level. Example: Sell 1 NFLX 800 Put $NFLX 20250124 800.0 PUT$ Pros: You collect premium income from selling the put. If Netflix stays above $800, you keep the premium as profit. If Netflix falls below $800, you may end up buying the stock at a discounted price, which you were willing to do in the first place. Cons: If Netflix drops significantly, you will be forced to buy the stock at $800, which could be above market value. Unlimited loss potential if Netflix crashes significantly, but the risk is managed by having the cash available to buy the stock. 3. Long Call When to use: You are bullish on Netflix and expect a strong upward move after earnings, and you want to take advantage of that potential with significant upside. How it works: You buy a call option with a strike price at or slightly above the current stock price. Example: Buy 1 NFLX 830 Call $NFLX 20250124 830.0 CALL$ Pros: Unlimited upside potential if Netflix rallies after earnings. Leverage: You can control a larger number of shares for a smaller upfront cost compared to buying the stock outright. Cons: You risk losing the premium paid if Netflix does not move up as expected. Time decay (theta) works against you as expiration approaches, so the move needs to happen sooner rather than later. 4. Bull Put Spread When to use: You are moderately bullish on Netflix and expect it to stay above a certain level after earnings, but you want to limit your risk while still profiting from that outlook. How it works: You sell a put at a higher strike price and buy a put at a lower strike price, both with the same expiration. Example: Sell 1 NFLX 810 Put Buy 1 NFLX 780 Put $NFLX Vertical 250124 780.0P/810.0P$ Pros: Limited risk because the long put serves as protection if Netflix falls sharply. You collect premium from the sold put, which offsets the cost of buying the lower-strike put. This strategy works best if Netflix stays above the higher strike price. Cons: Your profit is limited to the net premium received from the spread. If Netflix drops below 810, you will have a loss, though it’s capped by the protective put. 5. Call Ratio Backspread When to use: You’re highly bullish on Netflix and believe the stock could make a strong move higher after earnings. This strategy allows you to benefit from a large upward move while controlling risk. How it works: You sell fewer calls at a lower strike price and buy more calls at a higher strike price. Example: Sell 1 NFLX 850 Call Buy 2 NFLX 880 Calls $NFLX Custom 250124 850.0C/880.0C$ Pros: If Netflix moves significantly higher, you have the potential for large profits due to the long calls. Your risk is limited to the net cost of the spread if Netflix doesn’t move much or moves slightly against you. Cons: You could face a loss if Netflix doesn’t make a large upward move. The strategy is most profitable if Netflix rises sharply above the higher strike price. Strategy Selection Tips: Risk Tolerance: If you want a limited-risk strategy, go with the bull call spread or bull put spread. Both strategies allow for profit while limiting your potential losses. Upside Potential: If you're looking for maximum upside, buying a call or a long call spread gives you leverage, but be prepared for the potential loss of the premium if Netflix doesn’t move as expected. Income Focused: If you want to collect income and are comfortable owning the stock at a lower price, selling puts might be the best option. $(NFLX)$