Back on February 24th I wrote about AMZN while it was trading at $178 and noted the stock was trading at support. It has yet to break that support and has gone to $210 since then. This was the chart I posted back in late February. The circle on the chart above shows the approximate date I created the chart below:
Today the stock closed at $194 and tomorrow after the bell AMZN will report their earnings. With a 2% gain today the calls were up roughly 50% on many of the strikes. There is a large premium heading into tomorrow nights earnings release. So what type of option trades can we try and make for the big earnings report tomorrow? I have a tough time buying when premiums are so high.
If you plan on trading AMZN options tomorrow and holding through earnings you will need at least a 4% move from AMZN to make a profit. Considering AMZN has moved 10% or better many times in the past, a 4% or more could be in the cards tomorrow after the close.
I am going to treat AMZN much like I treated AAPL before earnings. I wasn't going to touch AAPL, but AAPL continued to fall and I saw a great opportunity to buy calls. I picked up the $605 strike for $3.75. I sold that position this morning at the open when the calls were being bought for over $15. My fill was exactly $15 from $3.75.
I am hoping for a dip in AMZN stock, I will then look for the calls. If we get a nice rip I will look for the puts. It is a very simple strategy, and it pays off more often than not. If AMZN stays flat, premiums will rise and I will sit on my hands and wait for the Thursday open. I will post my move in the chat room.
Volume on AMZN options were slightly skewed towards the calls today. I think AMZN will burst over $200 on earnings, but it will be tough to trade if I can't get cheaper $205 calls. My hope is AMZN gets dumped tomorrow much like AAPL did. If I don't get a price I like, then I won't be playing AMZN.