NEW DIRECTIONAL CALL PLAYS

Netflix Inc. - NFLX - close: 186.24 change: +8.19

Stop Loss: 174.90
Target(s): 199.50, 219.50
Current Option Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
2010 was the year of NFLX. The stock has rallied from $42.50 on January 1st, 2010 to over $200 just a few weeks ago. The correction in NFLX has stalled with shares near their bullish trendline of higher lows (and its 40 and 50-dma). Traders have bought the dip twice in the $176-177 area. The stock saw a strong bounce today thanks to the FCC commission voting 3-2 in favor or net neutrality rules, which should help NFLX growing download/streaming movie service.

Normally I would want to avoid following a big move like today's gain in NFLX but when this stock decides to move it can be volatile. I suspect this could be the beginning of its next leg higher. Make no mistake, this is a very aggressive, higher-risk trade. I suggest readers keep their positions pretty small to limit your risk. We'll be using out of the money calls to try and make this trade somewhat affordable. Our first target is $199.50. Our second target is $219.50.

Open positions now at current levels (small positions!)

- Suggested Positions -

Buy the 2011 January $200 calls (NFLX1122A200) current ask $4.40

- or -

Buy the 2011 February $220 calls (NFLX1119b220) current ask $5.45

Annotated Chart:

Entry on December 22nd at $ xx.xx
Earnings Date 01/26/11 (unconfirmed)
Average Daily Volume = 7.5 million
Listed on December 21st, 2010