There is considerable chatter in the options market about Netflix (NASDAQ: NFLX), the online DVD rental company. The traders are looking at a uptick on NFLX as seen in the options activity. Huge trading volume was seen in the January $60 call options which are still around $6 out-of-the-money. So NFLX would have to go up by around 10% between now and January 16, 2010 for these traders to be in the positive with their options.
However we do not, for a moment, think that traders are looking to keep the trade till the expiration. There is some speculation that Amazon (NASDAQ: AMZN) may make a bid for Netflix. That surely is a huge catalyst for a quick uptick in the stock price. The question is whether something will happen before January expiration. We are going to bet that it will. We are buying the NFLX January 2010 $60 call options at a premium of $45 per contract. Our target is for the premium to double and we will be out of the trade.
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