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On October 6, 2023, new options for Amazon.com Inc (AMZN) began trading, set to expire in June 2028. Investors are particularly interested in a put contract at a $230.00 strike price, with a current bid of $40.50, which allows sellers to commit to purchasing the stock at that price while effectively lowering their cost basis to $189.50 if the option is exercised. The premium represents a potential 17.61% return on cash commitment, or an annualized 6.94%, should the contract expire worthless with a 68% probability.
Additionally, a call contract at the $280.00 strike price carries a bid of $43.00. If shares are purchased at $231.21 and the call is sold, the investor could achieve a total return of 39.70% upon expiration, which carries a 45% chance of expiring worthless, thus allowing the investor to retain both the shares and the premium collected for an 18.60% additional return (or 7.33% annualized).
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