Major US stock indices ended on a positive note, with the NASDAQ hitting a new all-time high. This marks the NASDAQ’s 10th record close of the year, while the S&P 500 tallied its ninth. Closing figures show the Dow industrial average rising by 230.32 points, or 0.52%, to 44,485.10. The S&P index gained 33.76 points, or 0.54%, to reach 6,297.46, while the NASDAQ climbed 153.78 points, or 0.74%, to hit 20,884.27.

Netflix Earnings Report

Netflix reported earnings of $7.19 per share, surpassing the estimate of $7.06. The company’s revenue was $11.08 billion, just above the expected $11.04 billion. Netflix also increased its revenue forecast, now expecting between $44.80 and $45.2 billion, up from $44.43 billion. In after-hours trading, Netflix shares experienced fluctuations as the market reacted to the earnings report. With the market reaching new highs, we feel cautious optimism is warranted rather than outright bullishness. The tech-focused index remains strong, but these high levels bring the risk of a sudden drop. We believe this is a good environment for strategies that can benefit from upward movement while managing risk, like call debit spreads. The current CBOE Volatility Index, or VIX, is around 12.5, which is historically low. This suggests a sense of complacency among investors. In this low-volatility situation, protective options, such as long puts, are cheaper to buy. We see this as a chance to hedge long portfolios at a low cost before any market changes.

Post Announcement Dynamics

Netflix’s earnings report illustrates the dynamics following an announcement. Despite beating expectations and raising guidance, the share price fluctuations indicate that good news was already factored in. We advise traders to prepare for this “volatility crush” in future earnings by exploring premium-selling strategies like iron condors. Historically, periods of consistent record highs with low volatility, like we saw in parts of 2017, can last longer than anticipated but may end abruptly. Recent comments from Powell emphasized that the Federal Reserve is data-driven. Therefore, the upcoming Personal Consumption Expenditures (PCE) inflation data will be a key focus. Any surprising increase in that report could swiftly bring volatility back to the market. Create your live VT Markets account and start trading now.

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