Technical Amazon.com (AMZN) Trade Before Earnings
Amazon.com, Inc. Credit Spread (Nasdaq: AMZN)
TheOptionPlayer.com sets up an Amazon.com (AMZN) short-term (8-day) option strategy. Investors could simultaneously:
Sell the January week-three expiration AMZN $415 call for $1.45 (yesterday's closing price)
Buy the $420 call at $.85 (yesterday's close)
The difference between funds received and paid out is a $.60 per share credit which we keep if Amazon.com stock closes below $415 on Friday January 18th, but immediately exit the position if it appears the price will end up higher. Another suggestion is if the price gaps up open the trade using higher strike prices. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
We are basically playing Amazon.com (NasdaqGS: AMZN) stock to continue trading range-bound ahead of earnings in a few weeks. As noted in the Amazon.com chart below, after breaking through the previous short term resistance level several weeks ago, the price has been contained between current resistance and support (defined as previous resistance). Though Amazon shares are currently near 52-week highs you can easily see in the chart that the price actually has not moved much since the beginning of December. The chart also displays extremely low volatility as momentum indicators remain stuck in neutral. Unless there is some unexpected news it is reasonable to expect the stock price to remain subdued until Amazon.com reports earnings at the end of the month. At the very least there is a high probability that stock will continue to trade below the $415 target for another week.
52-Week High: $406.89
52-Week Low: $245.75
Average Volume (3 month): 2,911,800
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.