Baidu, Netflix Present Good Option Strategies

I don't normally write weekly options on the Monday when the market is so unstable and unpredictable, but the option premiums were worthy of a look, and my gut instincts told me to take a calculated risk that could pay off. Down days often increase put prices as people seek protection in the market. Big down days also present good opportunities to write options as many speculators tend to over pay for puts. This week, I took a look at writing puts on Baidu and Netflix.

Mar11 weekly Baidu 115 puts look attractive at this level. The Market Intelligence Center indicated bullish technicals with resistance at $124.42. A bullish sentiment on the stock would make writing puts a less risky trade. Baidu [BIDU:NDQ] is trading at $118.62, with the out-of-the-money option selling for more than $0.80/contract. That would net you 0.62% return for four days and 2 hours of trading, and allow you to profit if the stock were to rise, remain flat, or drop no more than 3.05%, a significant buffer.

Mar11 weekly Netflix 200 puts also look attractive. The stock has shown support in the low $200's for two weeks now, suggesting many traders are willing to pay $200-204 for Netflix [NFLX:NDQ] here. Until the fundamentals change, writing a 200 put for the week will earn you $2.50 per contract, with the stock trading at $205.85. This trade would earn you 1.21% for the next four days and change, also giving you a buffer of 2.84%.

To implement both of these trades, approximately $9,500 margin will be required per contract. To implement only one of the trades, at least $6,000 margin will be required per contract. Note, these figures may vary depending on brokerage requirements.

As always, I am not a licensed or registered trader, broker, or representative. The above post is a summary of my trading for the week and are ideas of ways to make money in the market. It is not meant to be taken as investment advice. Always consider your investment objectives and needs before implementing any strategy. Always talk to your advisor.