NFLX bull put spread: credit, risk, strikes

You are still selling downside — just not all of it. The long $68 put cuts the tail off below that level, which is why this needs $72 of buying power instead of the $6,900 a cash-secured put would tie up.

Above $69 at August 28, 2026, both puts expire worthless and you keep the full $28. Below $68, you lose the maximum $72. Breakeven is $68.72.

Return on risk is 39% for 27 days — 526% annualized. That headline is the reason people prefer spreads to cash-secured puts, and the reason spreads blow up accounts: the same capital supports several times the notional risk.

The risk is leverage, not the structure. $72 per spread is small; the temptation to sell ten of them because the buying power allows it is how a 66%-win-rate trade produces a losing year.

Between the strikes the loss scales linearly, so most of the damage happens fast when NFLX breaks $69. There is no assignment-and-hold escape hatch: the long put you own expires the same day.

Early assignment is an operational risk rather than a market one: it arrives on a weekend, converts a defined structure into a stock position, and requires cash you may have allocated elsewhere.

Netflix pays premium sellers well for eleven weeks and takes it back in one evening. The structural trade is to sell the post-print month, when IV has been crushed but the stock has already made its move and has no catalyst until the next release — that is where the implied-to-realized gap on this name is actually positive, and it is the opposite of when the credits look most attractive.

NFLX's Aug 28 strikes are $1 apart near the money (1.39% of spot). Coarse enough that the strike you want frequently does not exist, and the nearest rung is a different trade. 27k contracts of open interest on Aug 28 is workable around the money and thin in the wings — width costs more here than the ladder suggests. 32 strikes on that expiry — 50% of the board — carry prints that agree with their own implied volatility and hold up across the ladder, and those are the strikes priced here. Liquid around the money; the wings can be wide, and legging a four-sided structure here costs real money.

Skew is inverted: the 25-delta CALL implies 1.5% more vol than the put. That is the market pricing upside risk above downside risk — a squeeze, a takeover rumour, or a crowded short. Selling calls into an inverted skew pays better than usual and is riskier than usual for exactly the same reason. The term structure is flat inside 1.5% between the two captured expiries, so there is no calendar edge to harvest and no event visibly priced into one month over the other.

At 36% ATM implied vol, the Aug 28 options are pricing a one-standard-deviation move of $7.03 over 27 days — roughly −9.8% to +9.8%, or $64.68 to $78.74. The structure above sells the part of that distribution the market thinks it will not reach. Whether that is a good trade is entirely a question of whether 9.8% is too much or too little for NFLX over 27 days — the delta table cannot answer that, and neither can we.

The specific way people lose money on NFLX: Holding any short-vol structure through the print because the delta looked safe. The implied move on this name is routinely exceeded.