Amazon Options Trading: Key Insights on New Calls and Puts

Investors in Amazon.com Inc (Symbol: AMZN) now have new options available, with expiration set for June 6th. The latest analysis from our YieldBoost formula has identified noteworthy contracts among the new offerings, specifically one put and one call contract.

Put Contract Overview

The put contract at the $180.00 strike price currently has a bid of $8.30. By selling-to-open this put contract, an investor commits to purchasing shares at $180.00. Factoring in the premium, this sets the effective cost basis to $171.70, before broker commissions. For those looking to acquire shares of AMZN, this presents an appealing alternative to the current trading price of $183.67/share.

Notably, the $180.00 strike represents approximately a 2% discount from the current price, making it out-of-the-money by that margin. Current analytics indicate there is a 58% probability that the put contract could expire worthless. We will be monitoring these odds over time and updating our website to reflect changes. If the contract does expire worthless, the premium translates to a 4.61% return on the cash commitment, equating to 39.14% on an annualized basis, a figure we refer to as the YieldBoost.

Trailing Twelve Month Trading History

Below is a chart that depicts the trading history for Amazon.com Inc over the past twelve months, with a green highlight indicating the position of the $180.00 strike relative to this history:

Call Contract Overview

On the call side, the contract at the $185.00 strike price features a current bid of $9.05. Should an investor choose to buy shares at the current price of $183.67 and simultaneously sell-to-open this call contract as a “covered call,” they commit to selling at $185.00. Including the premium collected, this could yield a total return of 5.65% if the stock is called away at expiration, excluding any dividends.

However, it’s crucial to consider that substantial upside potential could be missed if AMZN shares significantly increase. Therefore, examining the trailing twelve-month trading history and understanding Amazon’s business fundamentals is essential. The chart below shows AMZN’s trading history, with the $185.00 strike highlighted in red:

The $185.00 strike is approximately 1% above the current trading price, placing it slightly out-of-the-money. There is a 49% chance that the covered call could expire worthless, allowing the investor to keep both their shares and the premium collected. If it does expire worthless, this would offer a 4.93% gain on the investment, or an annualized return of 41.82%, which we recognize as the YieldBoost.

Volatility Insights

For the put contract, the implied volatility sits at 42%, while the call’s implied volatility is at 41%. In contrast, the actual trailing twelve-month volatility, calculated based on the last 250 trading days and the recent price of $183.67, stands at 34%.

For further put and call options contract ideas, please explore additional resources.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.