AMZN Option Traders Will Wake Up To Potentially 1,000% Gains

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AMZN blew out its earnings tonight and the stock surged almost $30 after hours.  Call buyers who needed a 4% move higher just to break even tomorrow, will be sitting on  some amazing gains when AMZN opens for trade.  This is exactly why you trade earnings events.  It also shows the potential gains stock options can provide.

If AMZN opens at $225 tomorrow those who bought the $220 calls will be able to sell them for over $5.  Those calls closed at $.33 and were as low as $.12 earlier in the day.  10 contracts at $.33 would cost $330, if AMZN goes to $225 they could be sold for $5k.  $330 into $5k.

The call buyers of the less riskier strikes will also see some rather lofty gains.  The $215 calls closed at $.70 they should be at $8-$10 tomorrow.

The call and put volume was not skewed in either direction and volume was evenly distributed.  A move like this is great for option traders.

One could have played both the puts and the calls and made out with a big profit.  This is a strategy known as a strangle.

You could have bought the $215 calls 5 contracts at $.70 for $350.

And bought 5 of the $175 puts for $400 cost.   Total cost $750.   If AMZN opens at $225 you are looking at $5,000 - $750 for a $4,250 profit.  This will be the norm tomorrow for AMZN call holders.... big profits.  Congratulations.

AMZN option chain at today's close:

 

Profile photo of uranium-pinto-beansKnown to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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