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Option Brief: Amazon.com, Inc. (NASDAQ:AMZN) continues to swoon in the wake of an arguably icy reception for its Fire TV. The stock is down 3.8% at $321.30, at last check -- on pace for its lowest close since October -- and the options crowd is rushing to place eleventh-hour bets on the online marketplace.
So far today, AMZN has seen roughly 37,000 calls and 38,000 puts change hands, far surpassing its average intraday volume of around 13,000 calls and 11,000 puts. Traders have shown an affinity for last-minute positions, as the 10 most active contracts expire at the closing bell today. What's more, all 10 have seen volume exceed open interest, underscoring our theory of fresh initiations, with speculators employing both puts and calls to place neutral-to-bearish bets on AMZN's afternoon trajectory.
Most active is the weekly 4/4 325-strike put, where more than 5,700 contracts have traded on open interest of fewer than 2,000 contracts. The puts changed hands primarily at the ask price, suggesting they were bought. By purchasing the puts at a volume-weighted average price (VWAP) of $2.40, the buyers will profit if AMZN is sitting south of $322.60 (strike minus VWAP) at the closing bell today. Risk, meanwhile, is limited to the initial premium paid, should AMZN climb back atop the strike within the next few hours.
Meanwhile, more than 5,500 weekly 4/4 330-strike calls have crossed the tape so far, a healthy portion of which traded on the bid side, pointing to seller-driven volume. Plus, with fewer than 650 contracts in open interest, it's safe to assume most of the action at the strike consists of new positions. By writing the calls to open, the sellers expect Amazon.com, Inc. (NASDAQ:AMZN) shares to remain south of $330 through the close. In this best-case scenario, the calls will remain out of the money, and the sellers can pocket the initial premium received from the sale -- probably in the ballpark of $0.34, the current bid price of the calls.