The rate of call buying on Netflix is at multi-month highs
Netflix Inc (NASDAQ:NFLX) is trading down 0.7% this morning at $308.37, following a downgrade to "underperform" from "market perform" at Wells Fargo, which also dropped its price target to $265 from $308. The brokerage firm believes the streaming company won't be profitable per subscriber until 2022, and is concern that it's still losing $2 per subscriber per month. It also added that sentiment around Netflix's subscriber growth is not as positive now due to the increased competition from Walt Disney (DIS) and Apple (AAPL).
To be sure, most analysts still have bullish ratings on NFLX shares, and the average 12-month price target is up at $360.59. This price level is also notable because it's the site of the security's huge bear gap from July. More recently, the stock made a meaningful move above the 80-day moving average two weeks back, and is still up 16% year-to-date despite being far removed from its May high of $385.99.
Meanwhile, there's been a rush toward call buying in the options pits, as the 10-day call/put volume ratio of 1.65 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is the highest reading since mid-April. In other words, Netflix options traders are buying calls over puts at the highest rate in seven months. During this two-week time frame, the February 275 call has seen the largest increase in open interest, followed by the front-month December 300 call.