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Amazon is Winning the Binge Watching Wars

cat-ladyThe way we watch streaming video content is completely different than broadcast content.

There's no commercials, no waiting a week to see what happens next, and all the plot spoilers are already online.

Both Netflix and Amazon know this. In fact, a study done by the former showed that nearly three quarters of their customers are binge-watchers.

You know you've done it. Admit it.

You sit on the couch, half-comatose, with a case of beer and half-eaten pizzas as you finish your Sunday night with the third season of 24.

It then stands to reason that content distributors need to get their hands on the most "binge-inducing" shows... thinks like Lost, or Breaking Bad, or the Star Trek franchise.

But there's been a unicorn, that's been holding out for a few years.

HBO.

Knowing Jeff Bezos, he probably just kept bidding up the price to license their content, because he has said something like "whoever spends the most to get a customer, wins."

This is a big coup for AMZN. Just how big exactly?

Let's take a list of shows that your Prime membership will now get you. It's not fully comprehensive but is a good starter list:

hbo

These shows run about an hour long, so it's about 450 hours of content added.

Now let's say you have a full time job but you look forward to your "binges" on the weekends.

Let's also assume that you can do about 8 hours (or about 8 episodes) each day before you call it quits.

That means in a weekend you consume about 16 hours of content.

And yes, it gets depressing when you put a number on it.

If you did this every single weekend, you'd have 28 weekends tied up.

That's half of your year.

That you aren't watching Netflix.

In fact, you may just cancel Netflix and move over to Prime because you've already exhausted the content library, and besides you get free shipping!

Will this eventually happen? Hard to tell. But those are the stakes that these companies are dealing with.

Nasdaq is Stretched

It's been a great rally off the lows, but there is some concern:

ndx(Click to Enlarge)

The market has now rallied over 3% in the past 5 day period. That's happened only a handful of times, and it normally happens right after selloffs-- see the peaks in October and February came right after market drops.

Odds are good now for a correction. This can be either price-based from a pullback, or time-based from a range. Probably a little bit of both.

Is there an options trade here? Call spread sales or iron condors in next week's options seem like a good bet. And if you have any positions that you hated last week, you probably want to lighten up a little bit.

Magnet Trade in Facebook

There are two obvious levels of resistance in facebook right now: 60.50 and 63.

fb

If the first level is broken, it's a high odds bet that the stock will trade up to 63 to see if there is true supply there. This is what I call a "magnet" trade.

There's only a few days left until earnings so that can obviously change things, but I am looking for a quick move over the next few days.

Update: The stock gapped up to 62.75, almost fulfilling our target at 63.

fb

IWO Premium Members received a trade alert to pick up the Apr4 62 calls for 2.60, and they're now sitting at 3.80. As earnings are coming up, we are going to be very aggressive with taking profits.

Looking for Continuation in TWTR

During that nasty market reversal on the 15th, TWTR was one of the strongest stocks, finishing up over 10%. And now after a day of consolidation, I'm looking for continuation.

twtr

Update: Since this is a pennant flag, a quick and dirty way to measure upside is to take the height of the pattern and add it to the apex of the triangle. Which is where first resistance was found.

twtr

The Massive Risk Rotation

It's obvious now, that the majority of the selloff has been driven by high beta nasdaq names.

Here's another way to look at it.

Below is a chart of the VIX. It measures supply and demand for S&P options:

vix

And now a chart of VXN, which measures the supply and demand of Nasdaq options.

vxn

See the difference? The "fear" in the S&P is nowhere near the levels seen in early February, while the "fear" in the Nasdaq has gone all out of whack.

It gets even more drastic when you compare the two. Below is a chart of VXN relative to VIX, going back to 2009:

dislocation

This means if you are looking to get short volatility (both actual and implied), selling options in the NDX and related options will give you a better bang for your buck.