Update – Amazon’s (AMZN) Not So Prime Day

by CC July 28, 2017 11:09 am • Trade Updates

Yesterday we previewed Amazon (AMZN) earnings and detailed a couple of options strategies. The post was early in the day before large cap tech made a failry major intraday reversal. That reversal in AMZN was compounded after results and the stock is down towards the 1000 level this morning. First, let’s check in on the stock alternative from when the stock was 1077:

Bullish / Stock Alt

Buy the AMZN ($1077) Sept28th 1075/1125/1175 call fly for 13
  • Buy 1 Sept28th 1075 call for 25.50
  • Sell 2 Sept28th 1125 calls at 7.00 (14 total)
  • Buy 1 Sept28th 1175 call for 1.50


Rationale – Defining risk to just $13 vs an implied move of around $50. This targets that implied move to the upside. It could be worthless if the stock goes lower on the event but on the upside provides a wide range of potential profitability for a fraction of the cost of the stock itself.

With the stock 1011 this trade is worthless. But since it only risked $13 vs the stock’s nearly $70 decline the defined risk nature of the trade was helpful at only a fraction of the overall move. Those looking to be long AMZN should look to replace this trade with call spreads or call flies if the stock holds 1000.

Now let’s look at the bearish/hedge trade. Here it was:

Hedge / Bearish

vs 100 shares of AMZN ($1077) Buy the July28th 1050/1000 put spread for 9.50

  • Buy 1 July28th 1050 put for 11.50
  • Sell  July28th 1000 puts at 2.00


Rationale – This targets the big round number of 1000 on the downside where buyers would likely emerge on significant weakness. It risks just 9.50 and would be worthless if the stock is above 1050 on tomorrow’s close. As a hedge the worst possible scenario is a move to but not below 1050 as the hedge will be worthless and the stock will have losses.

With the stocks big move towards 1000 this worked well. With the stock 1011 this fly is worth $37 and change. Intrinsically it’s nearly worth the same as it’s currently trading so it can be taken off now in either scenario, whether it was vs stock or outright.