Netflix, Inc. (NFLX) stock is up 5% today, leading to huge call options volume in two out-of-the-money (OTM) tranches. NFLX call buyers and covered call sellers are bullish, based on the Warner Bros Discovery (WBD) acquisition saga and Netflix's earnings.
NFLX is at $82.45 in midday trading, up $4.21 (+5.39%). NFLX closed at a recent low on February 23 at $76.02, so it's now up over 8.4% in the last two days.
That could be why call options buyers and covered call sellers are now bullish on NFLX stock today. This can be seen in the Barchart Unusual Stock Options Activity Report.
It shows that over 3,400 call option contracts have traded at the $93.00 strike price for the period ending March 13, 2026. The second tranche of over 58,000 call option contracts traded at the $105.00 strike price for expiry on May 15.
Unusual NFLX Call Options Trading
These are highly unusual volumes. For example, only 175 prior $93.00 call contracts were open for 3/13/26 before today's unusual volume. That means today's volume is almost 20x the prior number outstanding.
And there were only 4,100 $105 calls outstanding for expiry on 5/15/26, leading to a Vol/open interest (OI) ratio of over 14x.
Note that both of these call option tranches are for out-of-the-money (OTM) strike prices - i.e., higher than the current trading price. The March tranche is 13% OTM, and the May tranche is over 28% higher.
That implies the buyers of these calls are betting that NFLX will rise over the next 16 days and 79 days, respectively.
Moreover, sellers of these calls, especially covered call sellers, may believe NFLX will rise, either to the strike price or not. Even if NFLX hits $93.00 for example, with the March 13 tranche, they would make a total return of over 13%:
($93+$0.41 premium)/$82.45 -1 = $93.41/$82.45 -1 = 1.133 -1= +13.3% upside
The May tranche covered call sellers could make a potential return of 28.5%:
($105 +$0.92)/$82.45 = $105.92/$82.45 -1 = 1.2847 -1 = +28.% upside
Why are investors so bullish? It likely relates to the Warner Bros. Discovery (WBD) takeover saga nearing an end, as well as Netflix's underlying strong free cash flow (FCF).
WBD Saga Nearing an End and Strong FCF
Paramount Skydance Corp (PSKY) recently submitted a new bid to the WDB board. According to CNBC, the board disclosed yesterday that the PSKY offer is now $31.00 per share for all of WBD, up from its prior $30 offer. That included the CNN and TNT assets, which are not in the Netflix offer.
The board said that if they deem the offer superior to the Netflix offer (which does not include all the assets of WBD), they will give Netflix 4 days to match the value of the PSKY offer. Netflix only wants the Warner Bros. studios and the HBO Max streaming service, not the CNN, TNT Sports, TBS, and other WBD assets.
According to the WSJ, the Netflix offer is equivalent to $27.75 per share, or $72 billion, but the PKSY prior offer at $30 was worth $77.9 billion. That implies the new offer is worth 1/30 higher (+3.33%), or $80.47 billion.
So, it all comes down to what the board thinks the CNN/TNT/TBS and other assets are worth to WBD - i.e., $80.47b - $72b., or $8.5 billjon. This is complicated by the WBD plans to spin them off into a separate public company called Discovery Global.
Investors must be feeling bullish now that Netflix will not match this higher offer from PKSY. Or, they may be bullish on NFLX, believing that just coming to an end of this saga will clear up uncertainty.
After all, as I described in my last Barchart article on Jan. 21, Netflix's free cash flow (FCF) was up 35.85% YoY. Moreover, its FCF margin is now almost 21%. That means NFLX could finance the $42 billion in debt costs if it closes on the WBD asset purchase.
But investors obviously prefer that Netflix not take on that debt. That may be why they are buying these call option tranches. They think Netflix may walk away from the takeover saga.
The bottom line here is that there is still a lot of uncertainty. That means that investors should be careful about buying these call options. It could be a highly speculative purchase, especially for the March 13 tranches.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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