On May 6, 2024, I made a strategic decision to add Netflix (NASDAQ: NFLX) stock to our partnership fund. I purchased 0.05 shares at $586.54 per share. This move marks the beginning of what I believe will be a fruitful investment journey with one of the most influential companies in the entertainment industry.
Personal Usage and Familiarity
As a long-time subscriber of Netflix, I have experienced firsthand the value and quality of their service. From watching captivating TV series like "Queen of the South" to utilizing Netflix Kids for my 5-year-old, the platform has become an integral part of our household entertainment. Investing in a company whose product I use and believe in gives me confidence in its long-term potential.
Potential Stock Split
There are rumors of a potential Netflix stock split on the horizon. While there is no certainty about when or if this will happen, a stock split could make Netflix shares more affordable and potentially more attractive to investors. This would also facilitate covered call writing without needing to acquire a full 100 shares initially.
Utilizing Dollar-Cost Averaging
To manage the high cost of NFLX shares, we are employing a dollar-cost averaging strategy. This involves purchasing a fixed dollar amount of Netflix stock at regular intervals, regardless of the share price. As a result, our average cost per NFLX share is $592.40. By spreading out our investments, we mitigate the impact of market volatility and reduce the risk of investing a large amount at a single price point.
Our long-term goal is to accumulate 100 shares of NFLX, enabling us to sell covered calls and generate additional income. At the current rate of acquiring 0.05 shares per week, reaching this target could take approximately 38 years. However, with potential stock splits and increased investment, we hope to achieve this goal much sooner.
Income Potential from Covered Calls
If we had 100 shares of NFLX today, we could sell a covered call expiring on June 7, 2024, with a strike price of $600 and receive a $15.12 premium. If the shares were called away, we would realize $2,472 in income from our total investment. Alternatively, if the options expired worthless, we would pocket $1,512, approximately 2.55%, and continue writing additional call options. This would lower our breakeven point to $577.28.
Adding Netflix (NFLX) stock to our portfolio is a strategic move driven by personal experience with the service, the potential for a stock split, and the benefits of dollar-cost averaging. While accumulating 100 shares may take time, the potential income from covered call writing and the confidence in Netflix's long-term growth make this a promising investment for our partnership fund.