Get Paid 8.5% to Buy NFLX at a 30% Discount – Here’s How
At about $94.39 a share, Netflix (NFLX) is trading about 30% below its 52W high.
Do you think NFLX stock is a good long-term bet at current levels? What about at a 30% discount at about $66 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
8.5% annualized yield at 30% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 12/18/2026, with a strike price of $66
- Collect roughly $298 in premium per contract (each contract represents 100 shares)
- That’s about 4.5% annualized yield on the $6,600 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.5%
- And you give yourself a chance to buy NFLX stock at deep discounted price of $66
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| NFLX stays above $66 | You keep the full $298 premium – 4.5% extra income over the next 364 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| NFLX closes below $66 | You’ll be obligated to buy 100 shares at $66. But thanks to $298 premium, your effective cost basis is just $63.02 per share – a roughly 33% from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
First, you want fundamentals to check out. For details, see Buy or Sell NFLX Stock or check Netflix Investment Highlights
Second, you want to better understand competitive advantage and industry tailwinds. Below is what specifically gives us the conviction.
Why Hold NFLX Stock Long-Term
Netflix’s wide moat is demonstrated by its exceptional pricing power and low churn, indicating a strong and loyal customer base. The company is the clear leader in a secularly growing industry, the global shift to streaming entertainment. Its massive scale, brand recognition, and growing free cash flow provide a significant competitive advantage. We are comfortable owning Netflix for the long term, as it is well-positioned to continue compounding value as the streaming market expands.
Competitive Advantage
We classify NFLX’s economic moat as WIDE, with the primary source being Pricing Power
- Successfully implemented multiple price increases across various plans in the US and other key markets, with the standard plan reaching $18 per month and the premium plan $25 per month as of early 2025.
- Despite price hikes, Netflix continued to experience robust subscriber growth, adding a record 41 million subscribers in 2024 and reaching over 300 million total subscribers.
- Maintains the lowest churn rate in the streaming industry, consistently hovering between 1-3%, which is significantly below the industry average of around 5%.
- The company’s crackdown on password sharing, which essentially acted as a price increase for many users, resulted in a surge of new sign-ups rather than a significant loss of viewers.
Industry Tailwind
The industry tailwind is STRONG, with CAGR projection of 21.5% (Source: Grand View Research)
Secular Trend: Shift to on-demand video streaming from linear TV
Key Risks: Intensifying competition leading to content exclusivity disputes and rising content costs, and potential for increased regulatory scrutiny globally.
Financial Guardrails
Cash Generation: Positive Free Cash Flow
Balance Sheet: As of late 2025, Netflix has a satisfactory net debt to equity ratio of 19.8%, and its debt is well covered by operating cash flow (66.2%). The company holds a substantial cash and short-term investments position of $9.3B, indicating a low risk of bankruptcy.
Not comfortable with options or stock-specific trades? PORTFOLIOS are even better.
The Right Way To Invest Is Through Portfolios
Single stocks swing wildly but staying invested matters. A well built portfolio keeps you invested, captures upside and softens the blows from individual stocks
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.