Netflix Earnings Preview: Why I’m Holding a Defined Risk Put Spread Through the Event

Netflix Earnings Preview: Why I’m Holding a Defined Risk Put Spread Through the Event

• I am holding a defined risk Netflix put spread through earnings with downside capped before the event
• The 90 85 put spread benefits from time decay and volatility compression rather than requiring upside
• Netflix earnings are being evaluated within a broader media consolidation backdrop
• The Warner Bros and Paramount situation adds narrative risk that favors risk defined structures

I am currently holding a defined risk options position in Netflix going into earnings. The trade is a February 20th expiration put spread where I sold the 90 put and bought the 85 put. I am intentionally holding this position through the earnings release, and that decision is based on structure rather than prediction.

Earnings periods tend to magnify uncertainty. Price gaps can be sharp, implied volatility rises into the event, and reactions do not always align with the quality of the report itself. A company can deliver strong numbers and still see the stock trade lower if expectations were already elevated or guidance fails to impress. Because of that dynamic, I do not approach earnings by trying to forecast direction. I approach them by defining risk before the event and letting probability work afterward.

This position does not require Netflix to rally. It does not require a perfect reaction or immediate follow through. It simply requires the stock to avoid a material breakdown below the area I am leaning against. That distinction is important. When a trade does not depend on precision, execution becomes calmer and management becomes simpler.

Earnings Are Only Part of the Story

This earnings cycle feels different because Netflix is not being evaluated in isolation. Investor focus extends beyond quarterly numbers and into the broader media landscape. Recent developments involving Warner Bros and Paramount have put media consolidation back at the center of the conversation, and those headlines matter even for companies that are not directly involved in every deal detail.

The Warner Bros and Paramount situation has highlighted how fragile and competitive the streaming ecosystem remains. Legal disputes, competing bids, balance sheet concerns, and long term content ownership questions have reintroduced uncertainty across the sector. When large media companies face restructuring or acquisition pressure, it changes how investors think about content libraries, pricing power, and future margins.

For Netflix, that means earnings are being judged through a wider lens. Subscriber growth and revenue still matter, but so does how Netflix positions itself relative to traditional media companies that are under pressure. The market is asking whether Netflix benefits from industry stress or whether it eventually becomes entangled in the same capital intensive challenges that legacy players face.

This environment tends to increase narrative driven volatility. Headlines can move stocks quickly even when they are only indirectly related. That is another reason why I prefer defined risk structures during earnings. When the market is reacting to both numbers and narrative, price behavior can become erratic and short term reactions are often unreliable.

In situations like this, selling premium with risk defined can make more sense than taking outright directional exposure. It allows the trade to benefit from volatility normalization once the earnings event and the surrounding headlines pass, rather than requiring the market to make a clean directional decision.

Why This Trade Works for Me

The 90 85 put spread expresses a neutral to slightly bullish stance without forcing a strong opinion. Netflix can trade sideways, drift higher, or even pull back modestly and the position can still perform. What matters is avoiding a sharp downside move that would violate the structure of the trade.

The long 85 put defines the worst case scenario. No matter how volatile the reaction is, the maximum loss is known before entry. That clarity removes the need to react during the earnings announcement or manage the position emotionally when liquidity is thin and spreads widen.

Implied volatility plays an important role here as well. Volatility is elevated going into earnings because the market is pricing in uncertainty. Once earnings are released, that implied volatility typically compresses. That volatility collapse can benefit premium based trades even if price action itself is muted or choppy.

Expiration selection is also intentional. The February 20th cycle gives the trade time beyond the immediate earnings reaction. Post earnings price action is often compressed into the first session or two and driven more by positioning than by thoughtful reassessment. Allowing additional time gives the market a chance to digest the information and settle into a more stable auction.

This is not an earnings gamble and it is not a conviction trade. It is a position that fits within a broader risk first process. The loss is defined, the expectations are realistic, and the trade does not depend on being right in the moment.

That structure is what allows me to hold positions through earnings without stress. I am not watching every tick or reacting to every headline. If Netflix holds above the level that would materially threaten the trade, the position works. If it does not, the loss is controlled and already accepted.

When risk is structured properly, earnings stop feeling like something to fear. They become another auction that is louder and faster than usual but still governed by the same principles as every other trading day.

Errol Coleman appears on the tastylive network shows Today’s Assignment , Risk & Reward and Trades on the Go.

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