Anyone tempted by Netflix?

Lot’s of good criticism of NFLX here, but at what price does this become irresistible?
The share price hasn’t been this low since 2017. They are trading at a PS of 2.8.
They are still making money the last time I checked. My wife won’t let me cancel.
I’m getting tempted. If google hadn’t become so attractive I might have bought Netflix already.

The “still making money” is an interesting point, since so few have historically purchased Netflix for its current or even near future earnings.
But if the reported stats are to be believed, it’s trading at a trailing P/E of, what, 16.8?
How times change.

Though, like you, I’m more interested in Alphabet today.
My wild speculation of the day: double your money with Jan 2024 $1300 call options which can be had for about $1100 right now.
Might take 2-3 years instead of 1.7 to work out, but I find it fairly hard to envision a terrible outcome.

Jim

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My wild speculation of the day: double your money with Jan 2024 $1300 call options which can be had for about $1100 right now.
Might take 2-3 years instead of 1.7 to work out, but I find it fairly hard to envision a terrible outcome.

I need to go the the Mungofitch school of options trading as it seems to be your preferred way of investing. How much does the Jan 2024 call option cost you?

Since options elude me, I just opened a position. Could you explain to this brick head how you could double your money in 2-3 years with $1300 Jan 24 call options?

need to go the the Mungofitch school of options trading as it seems to be your preferred way of investing. How much does the Jan 2024 call option cost you?

Since options elude me, I just opened a position. Could you explain to this brick head how you could double your money in 2-3 years with $1300 Jan 24 call options?

The price for each $1300 call option is $1100. Given the current price of $2300 you can break it down as follows.

Stock Value : $2300 - $1300 = $1000
Time Value : $1100 - $1000 = $100

The Stock value will change as the stock rises or falls. So to get a double you would need the stock to get to $3300; $3300 - $1300 = $2000 (double the $1000). However the Time value will fall and eventually hit $0 at the expiry of the option; so to get a true double you would need an extra $100; or $3400 on the stock price.

One thing to remember is that each option is for 100 shares; so the initial investment for 1 call option would be $1100 x 100 = $110,000.

tecmo

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Alternatively one can wait for Google stock split.

So for a cost of $1100 you buy the right to acquire a share at $1300 (for a total cost of $2400) any time before Jan. 2024? If so, then you lose money if the price stays below $2400 throughout that time period?

What happens if you don’t exercise the options? You’re out $110,000? I’d think you’d need to exercise even if the price was $2000 just to minimize your losses?

need to go the the Mungofitch school of options trading as it seems to be your preferred way of investing. How much does the Jan 2024 call option cost you?

Since options elude me, I just opened a position. Could you explain to this brick head how you could double your money in 2-3 years with $1300 Jan 24 call options?

=====

The price for each $1300 call option is $1100. Given the current price of $2300 you can break it down as follows.

Stock Value : $2300 - $1300 = $1000
Time Value : $1100 - $1000 = $100

The Stock value will change as the stock rises or falls. So to get a double you would need the stock to get to $3300; $3300 - $1300 = $2000 (double the $1000). However the Time value will fall and eventually hit $0 at the expiry of the option; so to get a true double you would need an extra $100; or $3400 on the stock price.

All true.

Another class that you will take in the MSOT is about leverage, and my interpretation of that class is that most of the advantage of using options is that it gives you some uncallable leverage. If the stock price doubles, in the above example, your option value will (roughly) triple. Of course, leverage works both ways: if the price of the shares stagnates (between 1300 and 2300), you end up losing your $100 time value. If the price ends up below 1300, you actually end up ahead, since you are not required to buy the shares at 1300. In effect, if you comparing buying the call to buying the shares outright, buying the shares is like buying call options and writing put options at the same strike price; by just buying the call options, it is like you are forgoing the put option part, and at low share prices (below 1300), not having sold that put option would end up being advantageous to you.

More generally, buying the shares OR the calls is something you do because you think the share price will go higher. Buying the calls gives you some leverage, but it also may work for you if they are very cheap, i.e. if the market is underestimating how likely a higher price is. And you shouldn’t overestimate the amount of leverage you get; really, you should have that extra $1000 (or $100,000 per contract) available for 2 years from now when it comes due.

Ideally, you would have some way of estimating how cheap is cheap. These concepts and calculations are not easy; for 99.9% of investors, ‘just opening a position’ is usually the better way to go, avoiding the pitfalls of leverage, the high bid-ask spread, and respecting the KISS principle.

dtb

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You may also choose to sell the option just prior to expiration, You could sell the option and purchase another at a slightly higher strike further out in time to allow the value thesis to play out.

Jk