Update Oct 25th, 2011 3:50Pm; with the stock down 4.6% on the day I just sold half of my position at 4.00 for a 1.30 gain, basically taking half my cost of the original purchase off of the table…..
Original Post Oct 25th, 2011 at 10:24am :
AMZN ($233.50) Options market is implying about a 7% move vs the 4 qtr average move of about 5.5%…..I am not going to spend a lot of time of the fundamentals or valuation in this stock, because they don’t really matter……
I am going to stick with the most profitable trade of the last few weeks for me, fade the move in high-flying tech shares (see AAPL and IBM) into earnings…..
In a market like this, when names that have performed like this with low single digit margins pressured by products that you are spending a ton on in R&D, marketing and losing money on products like Kindle and Tablet should not be rewarded in my opinion……there is a lot of good news in the stock trading within a few % of an all time high……
TRADE AMZN ($233.50) Bought the Oct29 weekly 225/215 Put Spread for 2.70
-Bought Oct28 225 put for 5.25
-Sold Oct28 215 Put at 2.55
Break-Even On Oct28 Expiration:
Profits btwn 222.25 and 215 make up to 7.30and below 215 make full 7.30
Losses btwn 222.30 and 225 lose up to 2.70 and above 225 lose full 2.70 or a little more than 1% of the underlying….
I DEBATED WHETHER TO PUT THIS ON NOW OR RIGHT BEFORE THE CLOSE….IF THE MARKET RALLIES TODAY (AND IT COULD AS WE ARE DOWN 1% AS I WRITE) AMZN WILL CERTAINLY RALLY WITH IT…..SO I INITIATED A HALF SIZE POSITION AND RESERVE THE RIGHT TO ROLL UP OR ADD TO IT CLOSER TO 4PM EASTERN.