It's Not Too Late to Double Your Money on Netflix Stock

Netflix Stock

While the FAANG stocks seemed infallible this year, Wednesday's sell-off in these technology leaders proved otherwise. Video-streaming giant Netflix Inc. (Nasdaq: NFLX) is no stranger to volatility, dropping 6% from its intraday high Tuesday through Thursday's close.

Given its history of volatility and all the conflicting company news lately, it is nearly impossible to predict the short-term twists and turns of Netflix stock.

Fortunately, Money Morning's options trading specialist, Tom Gentile, has strategies to profit from Netflix no matter which way the stock moves. In fact, you could double your money in just 60 days on NFLX stock...

Ignore the Noise and Profit from Netflix Stock Now

A trio of negative news stories in the last four months have led to concerns over trading Netflix stock...

Tom has used this pattern to show his readers triple-digit gains in one or two days. Click here to learn more...

In August, Walt Disney Co. (NYSE: DIS) announced it would pull all of its content from Netflix in order to start its own streaming business. In October, the stock was rocked following multiple serious allegations against Kevin Spacey, its "House of Cards" star. And now, we know that Ann Mather, who serves on Netflix's board of directors, sold 3,885 shares of the stock for $777,000.00 earlier this month.

But it hasn't been all bearish for NFLX.

On the positive side, Netflix continues to build its brand, extend its reach, and produce even more digital and streaming content. It has an excellent chance to weather the storm of improper behavior now engulfing Hollywood.

As for Disney, Netflix CEO Reed Hastings said the loss of this content wouldn't have that adverse an effect because its expansion into the international markets is going so well. The company added 5.3 million new subscribers in the fiscal third quarter, with 4.4 million of those new subscribers making up the international market.

"House of Cards" may have been its flagship program, but Netflix has been busy building more original content, such as the hit shows "Stranger Things" and "Narcos." Another negative event mitigated, and even turned into a positive.

And the best news for traders is that there is a way to profit, and even double your money, on Netflix stock whether you're bullish or bearish on the company...

The Bullish Trade for Netflix Stock

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If you think that Netflix stock's latest stumble is an opportunity to pick up shares on sale, then Gentile recommends an options strategy called a bullish "loophole trade" (also called a "call debit spread" or a "bull call spread"). This is a slightly bullish strategy where you anticipate the stock moving higher in the near term. It does not have to soar - just bounce back from its recent decline.

In this trade, you buy a call with a strike price just above the current market price of the stock and sell a call of the same expiration date, but at a slightly higher strike. Because the price of the option with the higher strike is lower than the price of the option with the lower strike, you will have an initial outlay (debit) to begin.

For maximum profitability, Netflix stock has to close at expiration above the high strike price. If the two strike prices are $5 apart, the most you can make is $5 per contract. However, you can still make something if the stock closes between the two strikes. And if the stock does not rally at all, the most you can lose is the initial debit.

With Netflix closing Thursday at $187.58, you can buy the Jan. 19, 2018, 190 call and sell the Jan. 19, 2018, 195 call. The price to buy the 190, based on Thursday's close, was $9.38, or $938 for one contract controlling 100 shares of stock. That is reduced by the money earned by selling the 195 at $7.15, or $715 per contract. The net cost or debit to you would be $938 - $715 = $223 per contract.

If the stock closes at or above 195 late next month, you make $500 - $223 = $277 per contract, or 124%.

How to Trade If You're Bearish on NFLX Stock

Now, if you see Netflix going lower, or even just staying put for a while, then you can use a bearish loophole trade ("call credit spread" or a "bear call spread").

As you can tell from the name, when you open the trade, you get a net cash deposit into your account. And you sell the lower strike and buy the higher strike.

You can sell the Jan. 19, 2018, 185 call, again based on Thursday's close, for $11.96, or $1,196 per contract. And you buy the Jan. 19, 2018, 190 call for $9.38, or $938 per contract. The net credit to your account at the start would be $1,196 - $938 = $258.

If the stock closes at or below 185 at expiration, you keep the $258. If it closes above 190, you would lose $500, offset by the $258 credit for a maximum net loss of $242.

No matter which way the stock moves, there is a way to profit without much risk. All it takes is a just a little creativity.

There's still time to get in position for these kinds of fast-moving trade recommendations... in fact, Tom has lined up six new profit opportunities that he expects to return at least 665% by New Year's Eve. That's enough to put a quick $6,325, $12,650, even $25,300 of extra cash in your pockets for the holidays. Click here to learn more...

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