Traders Bet on a Netflix Comeback Quarter

• Options pricing implies a 7.6% post-earnings move versus a 7.4% average realized move over the past year, with Netflix trading near its $70-75 support level from late 2021
• The most popular trade Monday was selling the 75-strike put expiring Friday, with one large trader collecting nearly $150,000 by selling 500 contracts
• Analysts cite lack of a major breakout hit this year and note that new ad-supported subscribers likely watch less content than traditional ad-free users, contributing to lower engagement per subscriber

Summary: Traders Bet on Netflix Comeback Quarter

Options traders are displaying bullish sentiment ahead of Netflix's Thursday earnings report, despite the stock's challenging performance. Netflix shares are down nearly 20% year-to-date at approximately $75, following a year-long bear market and sell-offs after four consecutive earnings reports.

Key Trading Activity:

• Call volumes doubled put volumes on Friday and Monday
• Nearly three times as many calls were purchased versus puts by midday Monday
• The most popular trade was selling at-the-money puts, with one large trader selling 500 contracts worth $150,000 at the 75-strike put expiring Friday
• Out of 20,000 transactions on that contract Monday, approximately 15,000 were sales

Technical Analysis:

Netflix is testing a critical support level around $70-75, matching its position from February when it ended Warner Brothers Discovery pursuit talks. This level also represents where the stock began an 80% decline in late 2021 before recovering to a peak of $134 in June of last year. The stock is currently testing its rising 200-week moving average.

Earnings Expectations:

Options pricing implies a 7.6% post-earnings move, slightly above the 7.4% average realized move over the past year.

Fundamental Concerns:

Analysts note Netflix lacks a major breakout hit this quarter. While Nielsen data shows growing U.S. engagement, viewership per subscriber has declined modestly. This decrease may result from new ad-supported users watching less content than traditional ad-free subscribers, combined with intensifying competition.

The bullish positioning contrasts sharply with Netflix's recent fundamental challenges and engagement concerns.