Netflix business model
Netflix is a company dedicated to the distribution of audiovisual content (series, movies, documentaries, among others) via streaming. There is no one today who does not know about the existence of the platform or who has not heard about any of its series.
And the fact is that Netflix is the number one of all streaming companies mainly because it is the oldest. Although it also contributes a lot the fact that it produces its own series and movies, some of which have achieved resounding success as is the case of La Casa de Papel.
Evolution of Netflix
The company was founded in 1997 in California and in 1998 began its activity with a DVD rental service by mail. In the year 2000, already with a website, Netflix started its personalized recommendation system, based on the rating of its customers.
It was not until 2007 that Netflix started its video on demand service as we know it today. However, at the beginning this service was only available in the United States and Canada, by 2011 it was already available in the rest of America and all of Europe.
But it was in 2016 when it took the big leap and began to offer its service worldwide thus becoming the great company it is today.
We already mentioned that Netflix produces its own series, movies, documentaries and animations. The company started with own productions in 2013 with the political drama Houses of Cards which was critically acclaimed at the time. And since then, Netflix's original productions have always given something to talk about.
Among its most famous productions we can mention:
- Money Heist
- Stranger Things
Among many others that, although they are series designed for a specific sector, have achieved popularity among its users in general.
Their future in the stock market
The evolution of this streaming company, its ability to adapt to new times and new technologies have a positive impact on the company's valuation.
That is why its share price has gone from $15 in the initial offering to the prices we have today.
And since Netflix is a technology company, it is only natural that its rise will continue, which makes this company one of the few that should always be taken into account.
Assets you can trade
If a long-term investment sounds like something you would do, and you won't need to withdraw your money in at least five years, index funds can be the best alternative. This kind of investment is also suitable for beginners since the risks are lower. Besides, the variety is wider.
Contrary to what it may seem, very few fund managers can beat the benchmark (although you have probably heard of investors who achieve huge returns).
But except for Warren Buffett and a couple more, all that glitters is not gold: if you hear of someone who has beaten the index, they have probably done so for a short period, or the rates are so high that it ends up being better for you to index (whit minimal commissions). Besides, take into account that past performances do not ensure a future one.
The great advantage of index funds is that they solve these two issues: their rates are insignificant and they beat active managers most of the time, although in the long term.
Forex or currency trading allows obtaining profits by exchanging one currency for another.
If you decide to exchange euros and dollars, you acquire euros and pay with dollars, with the expectation that after obtaining the first currency (the euro) it will raise its price compared to the second (the dollar), to make a profit by selling it. Let's say you entered when a euro is worth 1.10 USD and you exit when it reaches 1.15: that margin is yours once you sell again.
Perhaps you already inferred this, but this type of trading requires a large capital, since fluctuations are typically low, or using much leverage, which could be incautious. Our recommendation for those who are new in the world of trading is not to start with Forex, but with a safer and more secure market.
Most currencies are available on this broker. However, remember that this market works with contract for differences, therefore the underlying asset won't be yours.
How do Contracts for Difference work?
It is possible that you have found the initials CFD more than once if you already registered on this broker. We will come back to it, but you should know first that cryptocurrency trading on the platform is only CFD when you short sell.
For the record, and if you are thinking about day trading cryptocurrency or other practices, you will also meet terms like leverage and “going short”.
With CFDs you can operate on this broker even if you are not “in the black” or having a negative balance. For example: you are sure that the Netflix will go down, so probably you consider that it is better to refrain from getting in until it does. But if it actually falls, you can earn some money out of that.
You can do this through a practice known as “going short”. Its operation, roughly, works like this:
- You ask for a loan of, let's say, 100 units of Netflix, which total value at the moment is $ 5,000 (these figures are made imaginary)
- Then, you sell them at their market price, $ 5,000
- The price is reduced, as you thought, and the unit of Netflix now costs $ 30 instead of $ 50
- You get the 100 units again, but their total current value is now $ 3,000
- You give back the 100 units to the person that loaned them to you
- You keep the $ 2000 difference!
It is really simple. Just keep in mind that by trading in Netflix on this broker, you can make a profit when you anticipate downs.
How to use leverage in trading
Do you know the term “leverage”? We'll put it simply: trading lets you invest even more than you can have in a given time. That is, if you get in with $ 100 and you choose to leverage x2, you will be really investing $ 200.
Leverage and the importance of “Take Profit” and “Stop Loss”
Let's say that you are confident that Netflix will rise, and you want to “go long”. You have $ 1,000, but you actually can invest more and make more money.
There's the possibility of asking for a loan, but you must know that all the process takes time, and by the moment you finally get the money, Netflix might be already so expensive (if your guess was right) that investing wouldn't be convenient anymore.
Leverage is exactly like a credit, and you will only have to click a few times! You will be able to operate with much more money than what you have on the platform. It is simple, before investing you will see the different options as in the image below:
When trading with other assets you can use higher leverage. Why? Because cryptocurrencies usually represent medium-long term investments. However, leverage is used primarily for short-term operations or day trading. Let's talk a bit more about how leverage works.
If for your investment of $ 1,000, you use leverage x2, you will be investing $ 2,000. Your broker puts the remaining amount to reach that figure.
A few days pass and turns out that you were right: Netflix price has risen by 20% and the value of your investment is now $ 2,400. Ok, don't be greedy, it's time to sell.
You will have to give back the $ 1,000 of leverage and you will have made $ 400 (since the other $ 1,000 was your initial investment).
By starting with $ 1000 and getting $ 400, you'll be earning 40% of your investment.
Does it sound too wonderful? The trick is that the risk of losing out is also there. If everything goes as you planned, you will earn more money in less time; but if the value of the asset decreases, you will also lose more in less time.
For instance: if instead of increasing by 20%, the price falls by 10%, you won't lose $ 10, but twice that figure, which means $ 20. That is why to operate with leverage it is fundamental to be familiar with other two terms: Take Profit and Stop Loss.
Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price.
If you purchased Netflix shares at $ 100, you program your broker to close your operation when it reaches $ 120. That way, you make sure you won't change your mind and decide to keep waiting in case it keeps going up, which could be a mistake.
On the other hand, when operating with leverage you also have to use Stop Loss, because a small fall in the price of an asset can lead to a substantial loss. Take into account that the broker will recommend a limit for Stop Loss, but you should place it closer to current price than that.