3 Jul

Sucker Free Sunday

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Tomorrow is a new trading week…

And you better believe I’ll be looking for sucker bets.

Today, I want to point out to you one sucker bet that looks interesting to me…

It came up on my sucker bet scanner on Thursday.

I mean this bet was so wild… that I believe it’s going to lose value really quickly.

The trade was in Netflix (NFLX) puts, and based on the math…

The chances of the trader who placed this bet are slim to none.

So what specific trade did my scanner pick up on…

And how can traders play this?

 

Sucker Bet Detected In NFLX

 

Take a look at the trade in NFLX that went off on Thursday afternoon.

The stock was trading at $478.45 at the time…

And someone purchased the $375 puts expiring on July 17.

 

 

If you look at the scanner, there’s less than a 9.13% chance those options expire in the money.

That trader would need NFLX to drop by more than 20% by the expiration date… just to break-even.

Those options closed at $0.63… and there is a way to take advantage of that sucker bet.

You see, whoever takes the other side of that trade would actually have a 90%+ chance of collecting all the options premium.

However, if you know me, I’m really not a fan of naked selling options.

You see, even though the odds of NFLX dropping by more than 20% in about 2 weeks is slim… there is a chance.

The last thing a trader would want is for NFLX to drop significantly and losing more than they expect, in my opinion.

So one way to play the sucker’s bet is to hedge the position.

How?

Well, by selling the $375 puts expiring on July 17… and buy lower strike price puts.

It all depends on your outlook, but traders can go either $5 wide or $10 wide.

In other words, one could sell the $375 puts and either buy the $370 puts or $365 puts… at least that’s how I would look to take advantage of a sucker’s bet.

The thing is… NFLX is expected to report earnings on July 16, so maybe this trader is looking for a big miss in the numbers.

Can it happen?

Sure.

However, if I take sucker bets like that…

I tend to look to close out before the catalyst event, it’s just safer in my opinion.

I’m going to keep an eye on NFLX this week, and see if there are other sucker bets that pop up on my scanner.

Now, if you want to learn more about my options trading strategy and the “bookie” advantage…

Then check out my latest eBook, Wall Street Bookie.

Grab your copy here.

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