Buyers who followed my ‘jackpot bet’ guidance in the chat room Friday got sandbagged, paying a relatively lofty price for Oct 6 175 puts. As is my custom, I will record the worst actual price reported by a subscriber — 0.80 — as my cost basis for the trade. The stock gave up most of its gains by the end of the session, but this still left puts bought for 0.80 underwater. Since we were prepared to lose everything on this highly speculative bet, I’ll recommend holding the position until Friday. Just in case the options pop, you should offer half of the position (i.e., two puts) to close for 1.60, good till-canceled. Concerning the stock, Friday’s price action left me with no strong feelings either way._______ UPDATE (Oct 2, 4:24 p.m.): NFLX got thumped today, allowing subscribers who paid as much as 0.80 for Oct 6 175 puts on Friday to double their money when the options traded as high as 1.60 toward the end of the session. Officially we still hold two puts from an original four. I’d originally recommended the sale of two puts for 1.60 (see above), but sent out an intraday alert to sell them at-the-market. At the time, they were trading for around 1.53-1.58. Long-time subscribers will know that I always try to ‘double out’ on half of any profitable option position as soon as possible. In this instance, however, I did not want to subject everyone’s puts to the 1.60 price that applied to the worst-case cost basis, 0.80. Many subscribers evidently bought the puts for less. I hope you sold half of them when your own ‘double-out’ price was reached. Officially we still hold two puts whose cost basis has been reduced by profit-taking to 0.07. For now, offer one of them to close for 1.90.________UPDATE (Oct 4, 6:25 p.m.): This morning’s take-no-prisoners short-squeeze rally reminded us why we always want to double out (see above) as soon as possible, particularly if it is puts we hold. As you can see, it’s possible to do many things right and still lose money buying options. We could exit what remains of our position for 0.07 and scratch the trade, but what fun would that be? Let’s hold ’em till Friday in case an asteroid collides with Netflix. _______UPDATE )Oct 5, 7:26 p.m.): DaBoyz are fixing to run this rig up to the 210.23 target shown. Bet on it any way you like, but if you reverse the position at the target, a stop-loss of no more than 15-20 cents is all I’d recommend. You can widen it to as much as 35 cents if you’ve made money on the way up._______UPDATE (Oct 8, 6:30 p.m.): A little extra caution is warranted, since NFLX topped on Friday within an inch of the 198.73 ‘secondary pivot’ associated with our 210.23 target.
