Schaeffer's Street Chatter Highlights the Following Stocks: Netflix.CINCINNATI -- Today's "Street Chatter" from Schaeffer's Investment Research focuses on: Netflix (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :NFLX NFLX Netflix (NASDAQ symbol) ). "Street Chatter" is a report that analyzes three newsworthy stocks that are generating a lot of attention on Internet message boards. "Street Chatter" is published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link: http://www.schaeffersresearch.com/redirect.aspx?CODE=PRSC PRSC Partido Reformista Social Cristiano (Spanish: Social Christian Reformist Party) PRSC Post-Removal Site Control PRSC Program Resources Steering Council 12M&PAGE=1 Street Chatter: Netflix Online DVD rental Online DVD rentals allow a person to rent DVDs by mail. Generally, all interaction between the renter and the rental company takes place through the company's website. How it works Most companies operate on the following model: In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. a profit of two cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , a vast improvement over last year's loss of 17 cents per share in the same period. It is hard to perform better than NFLX has in the earnings confessional during the past four quarters. The firm has blown away the Street's views by an average of 383 percent in its past four trips to the earnings confessional. What's more, after beating the estimate by 13 percent during the last reporting period, NFLX surged more than 15 percent in one day. I tipped my hat to NFLX on March 27, hinting that aggressive options players should take a gander Gander, town (1991 pop. 10,339), NE Newfoundland, N.L., Canada. Gander's airport, an important base in World War II, is a hub for international flights; it also attracts many refugees. It was the site of a Dec. at a May or June 30 call. It seems that I get to toot my horn once again. If you had taken my advice at the time, your May 30 call would be up 64 percent and your June 30 call would have added 51 percent as of today, a decent return. Technically, the stock continues to put in a solid performance, rising higher along the support of its 10-week and 20-week moving averages. Following NFLX's breakout above the 30 level, the shares look primed to continue higher. Only the company's earnings report and some pesky resistance at the 31 level remain in the equity's way. Furthermore, with peak call open interest still waiting at the 30 level, there should be little in the way of options-related resistance for NFLX to overcome after the technical hurdles are cleared. Quick Facts on NFLX --Percent of analysts tracked by Zacks who rate the stock with a "buy": 42% --Number of analysts tracked by Zacks: 12 --Short interest as a percent of float: 38.98% --Short-interest ratio: 17.89 --Schaeffer's put/call open interest ratio (SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways ): 1.01 --SOIR percent rank: 77% --Overall Schaeffer's Equity Scorecard rating: 8.0 The sentiment indicators Sentiment indicators The general feeling of investors about the state of the market, such as whether they are bullish or bearish. for NFLX are all in the green today. Zacks indicates that seven of the 12 analysts rate the shares a "hold" or worse, and options players are betting heavily against the shares heading into Monday's report. But the most notable indicator is that nearly 39 percent of NFLX's total float is sold short. This stockpile of potential buying power Buying Power The money an investor has available to buy securities. In a margin account, the buying power is the total cash held in the brokerage account plus maximum margin available. Also referred to as "Excess Equity. could provide quite a short-covering rally for the stock following a positive reaction to earnings. With this data in hand, and a Schaeffer's Equity Scorecard rating of 8.0 out of 10, I am inclined to bet on a short- to intermediate-term call on NFLX. The May 32.50 call looks rather attractive right now, with an ask price of $1.35 (or $135 per contract) - a 4.2-percent premium of the stock's the current trading price Trading price The price at which a security is currently selling. . Additional reasoning for this position is that options players are showing a definite preference for puts over calls heading into Monday. Currently, the May 30 put has an implied volatility Implied volatility The expected volatility in a stock's return derived from its option price, maturity date, exercise price, and riskless rate of return, using an option pricing model such as Black-Scholes. of 60 percent, compared to the May 32.50 call's implied volatility of 54 percent. The higher implied on the put indicates that there is higher demand for downside protection Downside Protection Generally used in connection with covered call writing, this is the cushion against loss, in case of a price decline by the underlying security, that is afforded by the written call option. as opposed to upside potential Upside potential The amount by which analysts or investors expect the price of a security may increase. upside potential The potential price or gain that may be expected in a security or in a security average, generally stated as the dollar . With the speculative crowd not looking for an upside move, I'm inclined to go with the May 32.50 call as my hot pick for the week. Keep in mind that playing options is far from an exact science, and that any of these positions could garner a heavy loss for said investor. However, with the leverage of options on your side, you stand to make much more than your potential losses. As always, use sound judgment when entering any trade, and set your stop loss where you feel most comfortable. Until next time, good luck trading! Click the following link to see a Weekly chart of Netflix since March 2005 with 10-week and 20-week moving averages: http://www.schaeffersresearch.com/wire?ID=15843 The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PRSC12M&PAGE=1 About Schaeffer's Investment Research (www.SchaeffersResearch.com) Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method. |
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