Option traders are cashing in exponential profits in upside positions opened in Netflix only one week ago.
Last Wednesday, Investitute’s market scanners found that 3,200 Weekly $190 calls that expire this Friday were purchased for $0.60 to $2.10 with shares at $185.39. These were clearly new positions, as volume was far above the strike’s open interest of 1,792 contracts.
Those calls sold for $6.05 today, more than 10 times their original purchase price in five sessions. The stock rose just 5.5 percent at the same time, showing how quickly options can far outperform their underlying shares.
Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.
NFLX closed today off 0.07 percent at $194.95. The video-streaming service received two upgrades this morning: Morgan Stanley lifted its price target to $225 from $210, and Cowen raised its estimate to $215 from $197. Netflix is scheduled to report earnings this Monday, Oct. 16, after the market closes.