Although I don’t have a position in Netflix (NFLX), I have been watching how the options have been trading in advance of the company’s next earnings announcement on April 25.
First, here’s a look at the implied volatility (IV) for options on NFLX just before previous earnings announcements based on data from ivolatility.com.
The pink lines show IV for the options closest to expiration with the other lines representing IV for longer-term options. The blue arrows correspond to the earnings announcement date.
As you can see, volatility for options with around 30 days to expiration began to carry a much higher relative premium than options with a longer shelf life as the announcement date grew closer and closer.
After earnings, IV generally fell – especially for those shorter-term options. This is not an unusual pattern, but it can offer opportunities to use options to establish a position while limiting risk.
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