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Schaeffer's Daily Option Blog, Inc. (AMZN) Bounce Triggers Options Trading, Inc. speculators are swarming weekly option strikes

by 4/8/2014 2:06 PM
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Option Brief: After logging its lowest close since October on Monday,, Inc. (NASDAQ:AMZN) is on the mend, up 2.6% at $325.91. Bolstering the shares are some encouraging streaming video stats, as well as a federal appeals court ruling that found AMZN doesn't infringe on Rovi Corporation's (NASDAQ:ROVI) patents. Against this backdrop, AMZN calls and puts are trading at accelerated levels, relative to the stock's average intraday options volume, with speculators showing an affinity for short-term contracts.

In fact, AMZN's 30-day at-the-money implied volatility (IV) hit a 52-week high earlier in the session, but has since reversed course, down 5.9% to 42.5%. Echoing the demand for short-term options, the eight most active strikes expire at Friday's closing bell.

Digging deeper, traders are employing both weekly calls and puts to place neutral-to-bullish bets on AMZN. "Vanilla" option bulls are apparently buying to open the weekly 4/11 325-strike call, where volume has exceeded open interest, and most of the calls traded on the ask side. By purchasing the calls to open, the buyers expect AMZN to extend its rebound north of $325 through the end of the week.

Meanwhile, the most popular option is the weekly 4/11 320-strike put, where more than 2,300 contracts have changed hands. IV at the strike is trending higher, and volume has surpassed open interest, hinting at fresh initiations. Meanwhile, most of the puts crossed on the bid side, suggesting they were sold. By writing the puts to open, the sellers expect AMZN to remain atop $320 through Friday's close, keeping the options out of the money and allowing the sellers to pocket the initial premium collected.

Technically speaking,, Inc. (NASDAQ:AMZN) remains roughly 18.3% lower for 2014, and is poised to close a second straight week beneath its formerly supportive 50-week moving average. However, in light of the broad tech-sector swoon in recent sessions, the equity's 14-day Relative Strength Index (RSI) sits at 24 -- in oversold territory, suggesting a bounce may have been in the cards.


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