Day Trading NFLX

Session 1 - This months No Risk stock: NFLX

This month I will record all the activity of NFLX to show you how this strategy can make you a lot of money with little to no risk.

Because this stock is so beaten down, my bias is to get short and stay short under $105.00 per share. If they stock rises over this price on good volume, then I will change my daily bias accordingly.

For this example, I am going to trade a position of 500 shares and hold 250 overnight to capture gaps. During the trading day, I will add shares up to my full margin if I see opportunities to exploit for more profits.

Session 2 – Options

Here are the options prices for the month of Feb. I would sell 5 contracts of Naked Call on the Feb $100's then buy 10 contracts of the Feb $105.00 strike. Because I am taking in $6.15 per share or $3,075.00 I will only need to make an initial capital investment of $1,675 to insure my trading activities going forward.

Next we look at the ATR of NFLX for the past 10 trading days to get a baseline of expected movement each day:

As you can see, the stock has a daily average of $6.00 which is a very good amount of volatility for us to capture profits.

Next we look at our cost of insurance and our total risk to determine our daily profit needs to assure we are covered.

NFLX
Current Price	$ 93.96
Shares Traded	500
5 Naked Calls Sold at 100 strike	$ 3,075.00
Buy 10 Calls at 105 Strike	$(4,700.00)

Out of Pocket Expense to Cover Insurance	$(1,625.00)

Maximum Risk Between Stock and Sold Calls	$(3,675.00)

Profit Needed to Cover Maximum Risk	$ 7.35
Minimum Daily Profit to Cover Max Risk	$ 0.37

As you can see, we only need to make .37 cents per day to cover our maximum risk.

Our stop will be placed at $101-$102 because we will need the capital in our accounts to meet any broker requirement to take delivery of the stock should NFLX stay above our $100 sold price; however, if NFLX trades back below this, we just resell Naked calls.

Now if NFLX continues to trade higher, we should be able to make enough profits on the calls to cover any losses we make incur. In fact, if NFLX were to see a substantial rally, we would benefit greatly because we have 10 contracts (1,000 shares) vs. the 500 shares we were trading.

Remember, our bias is to stay Short on NFLX so long as it trades below $100 a share.

Each day, as we rack up profits, we will take some to purchase more OTM calls and puts depending on how the stock is trading as the month goes on.

Normally, I would NOT recommend you start this type of strategy the day before an earnings announcement, but I am going to do this to show what can happen if an unexpected event were to arise.

Also, you need to be able to actively trade with this strategy because there can be several opportunities during and after trading hours to maximize your profits.

The best part about this is you do not need to panic because you are fully hedged with calls.

(Update: As you can see below, the $105 calls more than covered out max loss and made us a huge profit!)

Here are the results for this trade strategy for the next month:

Day 1 Results

Day 2 Results

Earnings released and they beat driving stock up over $107 in post market. If it holds then I have to possibly buy the stock long as my Naked Calls will be put to me if the $105 price holds by expiration.

Day 3 Position Closed

I am now at risk of having 500 shares put to me at $105.00, but that does not matter because I am controlling 1,100 shares and my profits will surpass any difference in NFLX's price.

Yesterday, I was long into the close and ended the play ahead of earnings. I had a standing order to buy the stock at $105.00, so I was triggered in after hours and I went long 500 shares at $105.00.

Today the stock held the open so am still long with a stop at $110.

The $105 insurance calls I purchased have TRIPPLED giving this play a very nice profit and our risk of taking delivery the stock on the naked calls is wiped out.

I will continue to let the calls accumulate profits until they are stopped out then I will buy back and close the Naked Calls.

I will look for my next entry to start another play on this stock with this strategy. My bias is to stay long above $100 - $105.

Next we will keep track of the OTM options we buy with some of the profits we make day trading the stock:

Keeps getting BETTER!!!!!!

POSITION CLOSED OUT ON 1/30/12 Profit: $26,385.00

This play is now closed out but I am watching the $120 price area and if NFLX trades below this on a close, then I will SHORT this stock.

More No Risk Day Trading Plays:

Profits Up!

The donFranko

© 1999-2023 OptionRadio.com All Rights Reserved. Reproduction without permission is prohibited.

OptionRadio is a separate, unaffiliated company with any other companies or service providers listed on this website and are not responsible for each other's services and products.

U.S. Government Required Disclaimer - No profitability nor performance claims of any kind are being made on this entire website, email distributions or recorded content. All information provided herein is for educational purposes only and should not be construed as investment advice. Site visitors are advised that trading is a high-risk, speculative activity and that generally expected customer results are that all traders will incur trading losses, regardless of the training they may receive and will not become profitable. You accept all liability resulting from your trading decisions; we assume no responsibilities for your trading results. All sales are final for all products and services sold and no refunds are offered. We are not an investment advisory service, nor a registered investment advisor. No individual advice nor trading management services of any kind are provided, therefore no member nor subscriber should assume that their participation in the services provided herein serves, nor is suitable as, a substitute for ongoing individual personalized investment advice from an investment professional chosen by the member/subscriber. Nothing in our website shall be deemed a solicitation or an offer to buy nor sell stocks, currencies, futures, options or any other instrument. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of future results.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY, SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

Site visitors, email subscribers and customers hereby agree to all terms found in our complete disclaimer, terms of use and privacy policy pages. Every visitor to this site, and subscriber (or prospective subscriber or customer) acknowledges and accepts the limitations of the services provided, and agrees, as a condition precedent to his/her/its access to our sites, to release and hold harmless OptionRadio, its officers, directors, owners, employees and agents from any and all liability of any kind (including but not limited to his/her viewing of this sites' content, emails, subscription to services and/or purchase of any trader training product or service herein). Trade with discipline and you will have smarter, winning trades.