02102016 Option Methodologies ( AMZN )



by Bill Baker, J.D. 
Editor and Publisher, SINL


Today we are seeing how much pent up buying power is locked into the equity markets. This rally was sparked by Fed Chairwoman Yellen's comments giving hope to the idea that the Federal Open Market Committee (FOMC) may need to rethink increasing interest rates. 


Amazon (AMZN) -- After the market close on 01282016 Amazon reported earnings for its fourth quarter that ended 12312015. AMZN's net sales rose 21.8% to $35.75 billion missing the contrived analyst's expectations of $35.93 billion. AMZN's net profit rose to $482 million or $1.00 per share. A year earlier, AMZN's net profit was $214 million or 45 cents per share. The average analyst's contrived net profit number was $1.56. etc., etc., etc. 

On 02092016, AMZN closed at $482.07 which is significantly below its $635.35 01282016 close price.

AMZN shares are down $153.28 due in part to a methodical, managed stock market crash engineered to minimize the damage to major institutions that have been using the equity and debt markets as high stakes casinos. AMZN shares have also lost value after reporting excellent revenue and sales numbers that were overshadowed by a ridiculous net profit expectation contrived by analysts. Amazon was not able to reach this bizarre earnings expectation even after Amazon more than doubled their year over year net profit. AMZN shorts anticipating this contrived shortfall realized a huge profit.

Regardless of the who, what, when, where, why of Amazon's stock price retreat, AMZN is now at $482.07. Let's take a look at some AMZN option spread strategies that may give us the opportunity to profit from future AMZN price moves.  

Since January 1, 2016, the stock market has been going through a slow burn bearish phase. The present market condition is going to resolve itself during the next few months. We are eventually going to see a total capitulation and collapse or an explosive recovery where investors, who have been scared off by the recent downturn, are caught flat footed, waiting on the sidelines as stocks reach new highs day after day after day.

That being said, if you click on this link, you will be taken to an online spreadsheet where I have presented a few AMZN put and call positions.

Based upon 02092016 closing prices, one way to play AMZN (487.02 02092016 close price) would be to set up the following option spread:

Buy 10 AMZN JUL 15 '16 735 calls (1.75 x 2.39)
Buy 10
AMZN APR 15 '16 310 puts (1.26 x 1.41)