Goldman Sachs Suggests Buying Straddles on Netflix

Goldman Sachs is out with a research note this morning, where it suggests that traders buy straddles on Netflix

ahead of earnings. The analysts noted that NFLX August straddles are not pricing in the typical volatility they have seen on earnings day. Over the past 8 quarters, NFLX shares have moved +/-13.7% on average. Despite this tendency, the ATM straddle is only 12.7% of spot, or inline with the average daily move on earnings. This straddle captures 23 non-earnings trading days where shares could average +/-2.1% if it keeps pace with recent history. The analysts suggest buying the August $300 straddle for 13% of the underlying. Netflix, Inc. is an Internet subscription service streaming television shows and movies. The company's subscribers can watch unlimited television shows and movies streamed over the Internet to their televisions, computers and mobile devices and in the United States, subscribers can also receive digital versatile discs delivered to their homes.