Netflix Stock Still Looks 15% Too Cheap, Especially If It Keeps Producing 20% FCF Margins

If Netflix, Inc. (NFLX) produces strong Q3 results on Oct. 21 with at least a 20% free cash flow (FCF) margin, NFLX stock could still be almost 15% undervalued. This article will explain this strategy and its rationale. I will highlight why buying in-the-money, longer-dated (ITM) calls and shorting near-expiry, out-of-the-money (OTM) puts is a sound approach.

NFLX closed at $1,220.08 on Friday, Oct. 10, down less than 1% in a down market. It's off from a recent peak of $1,263.25 on Sept. 9, but still up from a recent low of $1,143.22 on Oct. 3.