Netflix Bear Sells Call Options Before Outlook Beat Estimates: Options Chatter
A $Netflix (NFLX.US)$ bear sold $1.79 million in out-of-the-money call options Thursday before the streaming giant released earnings that beat analysts estimates and painted a rosier outlook than Wall Street anticipated.
The transaction involved call options that give the holder the right to buy 175,000 Netflix shares at $1,180 by June 20. That block trade trade would be profitable for the seller as long as the stock continues to trade below that level, allowing the contract to expire worthless.
That bearish block represented about 57% of the volume on those call options so far. Trading on those calls, which reached 3,090, almost 12 times the open interest, exchange data tracked by moomoo showed.
Shares of Netflix advanced 4.2% in after-hours trading after the quarterly results were released. If the stock gains hold until the market reopens Monday, that could push closer to being in the money the call options sold in the block trade earlier. Markets are closed tomorrow in observance of the Good Friday holiday.
Netflix shares have risen about 9% this year through the close on Thursday, defying a stock market sell-off that sent the $S&P 500 Index (.SPX.US)$ tumbling more than 10% and pushed the $Nasdaq Composite Index (.IXIC.US)$ into a bear market earlier this month amid uncertainty over US President Donald Trump’s sweeping tariff policies. The streaming giant held on to gains, after more than tripling in the past two years amid optimism for continued revenue growth.
"We believe NFLX is likely most resilient within our coverage — but it’s not immune,” JPMorgan analysts including Doug Anmuth wrote in a note to clients earlier this month, when they trimmed their outlook for the company, including its stock price target to $1,026, from $1,150.
Netflix forecast a 15% jump in revenue to $11.04 billion in the second quarter, beating the average analyst estimate of $10.88 billion. The company also said its profit growth outlook remains solid, as it maintained its 2025 guidance forecast for revenue of $43.5-$44.5B and operating margin of 29%.
The rosier outlook came days after JPMorgan analysts cut their revenue growth forecast to 12.9% for the second quarter to $10.79 billion, from $10.86 billion earlier. They also lowered their free cash flow estimate by 5.1% to $1.75 billion.
Despite the cut to estimates before the earnings were released, JPMorgan analysts remained confident that Netflix “should prove more defensive against macro headwinds given strong engagement.
They noted that members typically spend about two hours per day watching TV and movies on Netflix. They also cited its historically low churn, high entertainment value to price ratio, and its relatively new ad tier, which charges consumers $7.99 per month in the US, making the streaming service more accessible to users.
Still, Morningstar analyst Matthew Dolgin expressed concern over the company’s recent jump in share price after the Wall Street Journal reported that the company is targeting a doubling of revenue and tripling of operating profit by 2030.
“If Netflix can achieve these targets, which would result in compounded annual growth rates, or CAGRs, of 12% and 19% for revenue and operating profit, respectively, through 2030, we'd currently see the stock as fairly valued,” Dolgin wrote in a note earlier this week.
Share your thoughts on Netflix in the comments section. Do you expect shares to sustain the rally, or are they nearing their peak? Let your voice be heard and if you want to read more options columns, follow me here. This column will be updated later when the earnings results are released, so don’t forget to check back for that.
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Luzi Ann Santos
Moomoo Senior News and Community Manager
Former editor at Bloomberg, ex-commentary editor at Lazard. Posts aren’t investment advice. Views are just mine.
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Cyclops 707 :
72055026 : couldn't understand. it goings to bear or bull?
Mimo803734 : bear
72055026 : thanks
股海踏浪 72055026 : For him, it is Zhuanggong City, a highly overvalued Zhuanggong stock. Once trapped, there is no hope of breaking free for a lifetime.
Anthony F : This didnt go so well for the call seller
KL6808 : The performance of most stocks are no longer about the financial results or forecast, it's about the next gig of Trump.
The worst is yet to be. You either hedge your physicals or take speculative shorts. If Trump is not impeached, assassinated, died due to illness/accident, he still have more than 3.5 years to have his joy dictating US and the world to be what he wanted.