Now is the time to bet on Netflix—and here’s how: Trader

With Netflix set to report earnings in less than a month, Todd Gordon of TradingAnalysis.com believes it's time to tune in to the streaming giant's shares.

A daily chart of Netflix shows that its stock has struggled to retake $130, a level just below the all-time high that it hit back in December of last year. But according to Gordon, Netflix is about to not only return to that level, but to break through it as well.

"You can see that we have tried the $130 area several times and it looks like with a solid earnings report and a continuing rally in the stock market, we should be able to punch through that $130 mark," the trader said Wednesday on CNBC's "Trading Nation."

To determine just how high Netflix could go, Gordon looks at the prices of the put option and call option with striking prices in line with the stock's current price. On Wednesday, the value of the 127-strike call was about $7.95 and the value of the 127-strike put was $7.80, which makes just under $16 altogether. This means that traders expect Netflix to close above $16 higher or lower on Jan. 20. A bull, then, could bet on Netflix $143.

Yet Gordon opts to make a milder bet by buying the January 130-strike calls and selling the January 130-strike calls for $1.93 per share, or $193 per options spread set to expire on Jan. 20. This means that Gordon is actually betting on a 6 percent move up for Netflix, and could make $307 if Netflix closes above $135 on that date. On the other hand, if Netflix fails to rise above $130, his trade will become worthless.

Trader takeaway: Gordon sees Netflix surging off of January earnings, so he buys the January 130/135 call spread for $1.93 per share.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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