BIG MOVE ON NFLX?

It's earnings season and Netflix (NFLX) has been one that many traders have paid attention to over the last year. It has gone through a tremendous growth phase over the last several months. Recently, many institutional investors have begun to wonder if the valuation on Netflix is starting to get too high. There have been a lot of attempts to short the stock with an expectation that it might start to go down. Many of those short sellers have been burned recently as the stock continued to go higher. This week there have been some new developments that might add to the short sellers arsenal. Earlier in the week, Comcast announced that they will buy NBC. Part of Comcast's future strategy is to use their cable network to increase on demand movies and programming. This will compete directly with Netflix. Since Comcast already owns the distribution channels (cable)...or at least a large portion of it, they have the upper hand in this competition. Also, an article came out yesterday that shows that Netflix might be angering a large group of their core subscribers by shutting down the DVD mailing portion of their business. Not immediately, but phasing it out. You can read the article by clicking on this link: http://blog.movies.yahoo.com/blog/432-netflix-is-abandoning-dvds-customers-who-prefer-dvds

This might not add to any future selling of the stock, but it doesn't help. NFLX reports earnings next Wednesday on January 26th. If the short sellers are correct, this stock will likely plunge after their earnings report...maybe sooner if the whole market starts to sell off. If they are wrong and the earnings report is really good, you will see the mother of all short squeezes and this stock could jump up $20 in one day. Since I don't know which way it will go, it sets up nicely for a Straddle or Strangle trade. If you have taken my Advanced Option Strategies Course (Course 2), you should know how to set up that trade. If you haven't taken Course 2, email me and I'll see if I can get you a good deal on it. Remember that you need to set this trade up before it gets too close to the earnings day. You also want to try to set up the trade on an upward move on the stock. This might be hard to do if the market sells off tomorrow, but you should try to follow that step if you can. I really think we are about to see a big move on NFLX...the big question is which direction is it going to go? The Straddle or Strangle trade will allow you to make money if it ends up making a big move up or a big move down.