Traders Target NFXL and NFXS ETFs Ahead of Netflix Report

Traders have concentrated positions in the Direxion Daily NFLX Bull 2X Shares (NFXL) and Direxion Daily NFLX Bear 1X Shares (NFXS) ahead of Netflix’s quarterly results, which are due after U.S. markets close Thursday. Market participants are positioning for a sharp move in Netflix stock tied to subscriber numbers and management comments in the earnings update.

Netflix shares have flattened in recent months. Analysts estimate earnings per share of $0.79 for the quarter, up from $0.72 a year earlier. The company routinely discusses subscription metrics, pricing and content plans on its earnings call, and those items are expected to affect short-term trading in NFLX.

NFXL seeks to deliver 200% of Netflix’s daily price movement and provides leveraged long exposure for traders expecting a positive reaction. NFXS seeks the inverse of Netflix’s daily return and is used by traders seeking gains if the stock falls. Both ETFs reset daily and are generally used for short-term trades around events such as earnings.

Investor interest in the ETFs reflects questions about Netflix’s pricing and content strategy. Morningstar analyst Matthew Dolgin noted, “Netflix’s streaming dominance is under greater threat than when it was establishing its position and charging relatively low prices.” He added that Netflix’s cash flow should allow continued production of series and films and that he expects further international growth.

If the earnings report shows subscriber losses or customer resistance to recent price increases, trading volume in inverse positions such as NFXS could rise. If the company reports subscriber gains and optimistic guidance on content and international expansion, leveraged long positions in NFXL could see increased flows. Traders will also watch any management comments on content strategy, acquisitions or licensing.

Because of the daily-reset mechanics of NFXL and NFXS, market participants typically use them for short-term exposure around the earnings window rather than for multi-day holds. The timing of the report and the company’s subscriber commentary make Thursday’s update a focal point for traders using these ETFs.