Outrageous Predictions
Obesity drugs for everyone – even for pets
Jacob Falkencrone
Global Head of Investment Strategy
Investment and Options Strategist
Summary: Netflix reports earnings this week, and the stock can reprice quickly when guidance is updated. This educational case study shows how a cash-secured put can pay you for waiting while setting a pre-defined entry level you would be comfortable owning long term.
Netflix reports earnings this week, and earnings updates can change how investors value a company in a single session. That is why prices can gap up or down overnight. For long-term investors, this often creates a trade-off: buying just before the report can feel uncomfortable, while waiting until after the report can feel safer but may mean missing a rebound. This educational case study explains one alternative approach: a cash-secured put, which aims to set a pre-defined buy level and collect premium while you wait.
Netflix reports earnings this week. When a company reports, investors quickly reassess expectations for the months ahead, which is why earnings weeks can bring larger-than-usual moves.
If you are a long-term investor, it helps to be clear about what you want. If you would happily own netflix at a lower price, a cash-secured put can be a structured way to express that view. If you would not want to own the shares after a disappointing report, this strategy is usually not suitable.
Around earnings, options often become more expensive because investors pay more for protection and because traders pay more to participate in a potential jump. One useful way to summarise what the market is implying is the expected move, a number derived from option prices.
In plain terms, the expected move is the market’s implied “typical move” for a specific period. It is not a forecast and not a maximum. The actual move can be (and usually is) smaller or larger. Investors often use it as a reference point because it reflects what buyers and sellers of options are collectively pricing in as a reasonable range of uncertainty at that moment in time.
Based on current option prices for the week that includes earnings, the options market is implying a move of roughly ±$6.03 (±6.84%) from recent price levels. That translates into an indicative range of about $94 on the upside and $82 on the downside for the earnings week.
That downside level matters for this case study because the strategy uses an $82 strike, which sits almost exactly at the implied lower bound for the earnings week.
A cash-secured put is an entry-focused options strategy. You sell a put option and receive a premium today. In return, you accept an obligation: if the stock is below the strike price at expiry, you may be assigned and must buy 100 shares at the strike.
The “cash-secured” part is the risk discipline. It means you keep enough cash aside to buy the shares if assignment happens. This strategy is therefore only suitable if you would genuinely be comfortable owning the shares at the strike level.
Important note: The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.
In this example, you sell the 23 jan 2026 $82 put on NFLX for an indicative premium of $0.98 per share (about $98 per contract, before fees).
If the option expires worthless, the simple return on the reserved cash is about $98 / $8,200 ≈ 1.20% over roughly eight days. This is a single-trade illustration. Earnings-week premiums are often elevated, so this is not a reliable “weekly income” expectation.
The strike selection needs to be explainable in plain language, especially around earnings.
It is important to stress that these three points are context, not assurance. Option-implied ranges, chart levels and open interest can help explain why a strike is chosen, but they do not guarantee that a price will hold, especially around earnings. Unexpected news or guidance can still push the share price well beyond these reference levels, which is why a cash-secured put should only be used if you are genuinely comfortable owning the shares after such a move:
A useful rule for beginners is to treat the strike as a decision, not a prediction: “I would own this stock at this level.”
Example at $81:
Example at $75:
The main risk is an earnings gap that is larger than the expected move. The expected move is an implied estimate, not a cap. If the stock falls sharply, your short put can be assigned and you will own 100 shares at the strike.
It also helps to treat assignment as a possible outcome from the start. If you would be unhappy owning the shares, a cash-secured put is usually the wrong tool.
Finally, keep the “cash-secured” discipline. On the Saxo platform, selling a put does not require posting the full share value as margin upfront. However, the conservative and educational approach is still to behave as if you must be able to fund the full share purchase if assignment occurs. Because option prices can widen around earnings, using limit orders rather than market orders is also sensible.
From an investor perspective, the most important parts of an earnings update are typically the forward-looking signals. Pay attention to guidance for the next quarter and the year ahead, how operating margin and free cash flow are trending, and any commentary on advertising progress and engagement.
A cash-secured put can be a structured way to approach earnings week if you like netflix long term but prefer to buy at a lower price.
In this case study, the $82 strike is not presented as “safe”. it is presented as a deliberate entry level that sits near the market-implied downside boundary for the earnings week, with a breakeven near $81.02 after premium.
If you would not be comfortable owning NFLX after a disappointing report, this is not an appropriate strategy.
| More from the author |
|---|