[Options] This Mega Cap Is Not Like The Others
Amazon has earnings this week, so it's no surprise that options premiums are elevated:
But in our view, this increased premium is more due to the recent 10% selloff $AMZN experienced. And we think the selling is overdone here, which sets up today's trade.
Be sure to watch the video above for a more in-depth analysis of why we like this setup.
Here's the Play:
I like selling $AMZN September 170 puts for approximately $4.35 per contract. This premium I collect today is the most I can earn in this trade. But that comes at the cost of this trade having UNdefined risk. If undefined risk makes me uncomfortable, I can buy a further out-of-the-money long put (I like the 150 strike) to convert this trade into a defined risk put spread.
As long as $AMZN does not see a closing price below $170 per share (my strike price for the short puts), I'll continue to hold the position until I can exit for a debit equal to 50% (or less) than today's credit. Whether just the naked short put or the short put spread, the exit strategy is the same.
If you have any questions on this trade, please send them here.
If you missed my most recent ASO video Jam Session, you can catch a replay on Stock Market TV.
P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7910.