In the December 28^th pages of this blog, we recommended the Netflix (NFLX) March 2008 25 puts (QNQOE), anticipating an underlying stock drop to about $23. After a 60% move off September 2007, and a stock move above the upper Bollinger Band, the end was nigh for the mail order DVD company’s rally.

Sure, Citigroup upgraded the stock, as Credit Suisse upped stock price estimates. But who really cares what the big banks have to say any more? Ignoring them, buying the put at $1.75 instead, we’re up 66% in about five days – further proof that it pays to ignore the banks.

If you followed the advice, I’d love to hear how you did with it. You can e-mail me at TheTradingPit@yahoo.com. For those that didn’t take the advice, don’t worry about it. We’ll have similar trades in our upcoming options service.

Here’s another one to chew on for the time being.

Shutterfly (SFLY:NASDAQ) is likely headed to $15. While it’s already fallen more than 16%, there’s further downside here. Failure to price compete with Hewlett-Packard’s Snapfish unit’s decision to cut 4x6 prints could cost SFLY dearly.

Snapfish cut their 4x6 to nine cents from 12 cents, as compared to SFLY’s 19-cent 4x6 cost. For this company to maintain a 10-cent price difference will cost it customers.

With a near-term $15 price target, we’d recommend buying March 20 puts (QFYOD) on SFLY.

Again, stay tuned for similar plays when we launch our options letter.