NFLX iron condor, priced on the real chain

Four legs, one idea: you are selling the market's estimate of how far NFLX can travel. The short strikes ($66 / $80) define the range you're renting out; the long wings ($65 / $81) cap what a violent move can cost you.

Both spreads cannot lose. NFLX finishes on one side of the market, so at most one vertical goes in the money — which is why max loss is the width of ONE spread minus the credit, $71, not double it. Max profit is the $29 credit, earned by doing nothing.

Breakevens land at $65.71 and $80.29. Outside that band the position loses; between it, it wins. That band is 20.3% wide relative to spot, against 36% implied vol over 27 days.

Return on risk is $29 against $71 — roughly 41% if it works. You need a high hit rate to justify that ratio, which is exactly what the 68% probability is telling you.

The risk shape is a plateau with two cliffs. Anywhere between $65.71 and $80.29 you make money; past the long wings you lose a fixed $71. Between short and long strike the P/L slides linearly — that is where most condors are actually managed, not at expiry.

Assignment risk is real on the short legs, especially the calls near ex-dividend, and especially in the last week. Being assigned on one leg of a four-leg structure leaves you with a stock position and a broken condor over a weekend.

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). On a ladder that wide, "pick the 0.30 delta strike" resolves to whichever rung happens to be closest — sometimes not close at all. 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. A short-premium structure here is a bet that 9.8% over 27 days is more than NFLX will actually use. That is the thesis, stated honestly.

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