New Amazon Options Trading: What Investors Need to Know
Spotlight on March 7 Expiration Contracts
Investors in Amazon.com Inc (Symbol: AMZN) can now explore new options that began trading today, with a focus on contracts set to expire on March 7th. At Stock Options Channel, our YieldBoost formula examined AMZN’s options chain to identify two standout contracts: one put and one call.
The put contract at the $210.00 strike price currently has a bid of $1.64. Selling this put contract would mean committing to purchase AMZN shares at $210.00, while also collecting the premium, resulting in an effective cost basis of $208.36 (before broker fees). For investors planning to buy AMZN shares, this presents a potentially appealing alternative to paying the current price of $234.59/share.
Since the $210.00 strike is about a 10% discount from the current trading price, there is a chance that the put contract may expire worthless. Present analytical data indicates an 82% likelihood of this outcome. Stock Options Channel will monitor these odds, updating a chart of that information on our website under the contract detail page for this contract. If the contract does expire worthless, the premium would yield a 0.78% return on the cash commitment, translating to an annualized rate of 6.63% — referred to as the YieldBoost.
Analyzing the Call Side of the Options Chain
On the calls side, a contract with a $240.00 strike price has a bid of $7.30. If an investor buys AMZN shares at the current price of $234.59/share and sells this call as a covered call, they would agree to sell the shares at $240.00. Factoring in the premium collected, this gives a potential total return of 5.42% if the stock is called away by the March 7th expiration (excluding dividends and prior to broker commissions). However, should AMZN shares significantly increase in value, some upside could be lost. Therefore, reviewing AMZN’s trading history and fundamental business data is wise.
Below is a chart displaying AMZN’s trading history over the past twelve months, with the $240.00 strike price highlighted in red:
The $240.00 strike price represents about a 2% premium over the current trading price. Thus, there remains a possibility that this covered call contract could expire worthless, allowing the investor to retain both their shares and the collected premium. Current analytics show a 55% chance of this happening. We will track these odds over time and post updates on our website under the contract detail page.
Should the covered call contract expire worthless, the premium would amount to an additional 3.11% return for the investor, or 26.41% annualized, also known as the YieldBoost.
The implied volatility for the put contract example is 38%, while the call contract shows 34%. Meanwhile, we calculate the actual trailing twelve-month volatility, based on the last 250 trading days and today’s price of $234.59, to be 28%. To discover more promising put and call options contracts, visit StockOptionsChannel.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
