Earn 9.5% Yield While Waiting for Netflix Stock to Drop

According to a report from Trefis, investors can generate an annual yield of up to 9.5% using a cash-secured put option strategy on Netflix (NFLX) stock. This strategy allows investors to collect immediate income regardless of stock movements, while positioning to buy shares at a discount if the stock falls to a certain level.

Strategy Details

The strategy involves selling a put option on Netflix stock with a strike price below the current market price, while holding enough cash to cover the purchase if the option is exercised. The investor receives an immediate premium, which represents the yield mentioned.

Context

This proposal comes at a time when Netflix shares are trading at relatively high levels, leading some investors to wait for a better entry point. The strategy generates income during the waiting period.

What This Means for Investors

This strategy suits investors who want to acquire Netflix at a lower price and find the 9.5% yield attractive compared to alternatives. However, it carries risks: if the stock rises sharply, the investor may miss out on gains; if it falls steeply, they may be forced to buy at a price above the market. Consulting a financial advisor is recommended before implementation.