(AMZN) Defying Gravity……Again

by Dan September 12, 2011 12:28 pm • Commentary

This is a company that a love and a stock that I hate…I have on a couple occasions tried to short the name, but truth be told if you are just trying to do on valuation good luck…..I am looking at the name because of its strength, because it is so resilient and want to make short term low premium, but potential high payout trade this week in the name.

I just posted the following on “Quick Hits” on the Site.  

Sep 12 2011, 12:07 PM

Dan:: AMZN I bought the Sept 205/195/185 Put Fly for .80....this is for thei Friday Expiry

Sep 12 2011, 12:07 PM
Dan: I am risking what I am willing to lose

Sep 12 2011, 12:07 PM
Dan: the stock is less than 7%off the 52 week high and more than 18% off of last weeks lows

Sep 12 2011, 12:09 PM

Dan: I looked at vertical spreads and outright put purchases and they all seem fairly expensive....this structure offers a more than 10 to 1 payout if the stock is down 8.5% on Friday’s expiration

Sep 12 2011, 12:10 PM

Dan: now that may seem like a long shot, but if the market were to head back to this mornings overnight lows and we close below 1121 in the SPXstocks like AMZN should play catch up

Sep 12 2011, 12:10 PM

Dan: this is a low conviction trade

This was with the stock around $214…..Listen I wouldn’t short this stock with your money, but I took some gains in some name shorts this morning and want to look for fresh opportunities….this is a pretty binary bet this close to expiration, either gonna break-even and make some $ or I will likely lose most of the premium as bid/ask and commissions could make it difficult to get out.
TRADE: AMZN ($214)  BUY Sept 205/195/185 Put Fly
-Buy 1 Sept 205 Put for 2.00
-Sell 2 Sept 195 Puts for a total of   1.50 ( .75 each)
-Buy 1 Sept 185 Put for .30
Break-Even on Sept Exp:
Profits: btwn 204.20 and 195 make up to 9.20, at 195 make full 9.20
Losses: btwn 204.20 and 205 lose up to .80, btwn 185 and 185.80 lose up to .80 and below 185 lose all .80 and above 205 lose all .80
This Trade is a bit of a punt and I don’t have strong conviction but willing to risk the .80 btwn now and Friday’s close.  As always this structure is not for everyone and it can be costly to get on, but if you trade flys ALWAYS USE LIMIT ORDERS.