While Netflix (NFLX) stock has seen a considerable decrease of 30% in its value over the last half-year, there's a strong indication that its decline may not extend much further into the middle of March. In the realm of options trading, investors typically focus on short-term engagements, usually spanning from one week to a month. However, for those looking for a different approach, a bull put spread offers a compelling alternative for managing risk and potential gains over a slightly extended period.
This particular options strategy, a bull put spread, involves selling a put option and simultaneously buying another put option with a lower strike price, both with the same expiration date. This setup is chosen when an investor anticipates a moderate rise in the stock's price or believes it will not fall below a certain level. Given Netflix's recent performance, employing such a strategy suggests a calculated outlook that the stock has likely found a support level and is unlikely to suffer further significant losses in the near future.
By understanding the dynamics of option spreads, investors can strategically position themselves to benefit from stock stability or a modest recovery, even after a substantial price correction. This method allows for a balanced approach to risk and reward, moving beyond conventional short-term options to leverage a more considered market perspective.