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Amazon.com, Inc. (NASDAQ:AMZN) is flirting with a 0.7% lead at $334.72, with help from a bullish nod at Goldman Sachs and reports of a local marketplace launch on the horizon. However, the shares are running into a wall in the form of their 50-week moving average -- a former ally on the charts that's capped AMZN's rebound attempts in recent months -- and option traders are rolling the dice on limited short-term upside.
The equity's 30-day at-the-money implied volatility (IV) has jumped 3.4% to 28.3%, pointing to a growing demand for short-term contracts. While intraday call volume is running at close to twice the typical pace, some speculators are employing the contracts to place neutral-to-bearish bets on AMZN.
Specifically, the weekly 6/13 340-strike call is most popular, with about 7,100 contracts exchanged. The majority of the calls crossed on the bid side, IV has popped 3.1 percentage points, and volume trumps open interest at the strike -- collectively pointing to sell-to-open activity.
By writing the calls to open, the sellers expect AMZN to remain south of $340 through Friday's close, when the weekly options expire. In this best-case scenario, the calls will expire out of the money, and the sellers can retain the entire premium received at initiation. Losses, on the other hand, will begin to add up if AMZN topples the strike within the option's lifetime.
While today's option traders are utilizing calls to place a cap on AMZN's upward momentum, the stock is no stranger to "vanilla" option bulls. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio rests at a 12-month peak of 2.17. In other words, option buyers have scooped up AMZN calls over puts at an annual-high clip during the past couple of weeks.
Elsewhere on Wall Street, today's upgrade from Goldman was par for the course for the shares. Despite underperforming the S&P 500 Index (SPX) by more than 15 percentage points during the past three months, AMZN boasts 26 "buy" or better endorsements, compared to four "holds" and not a single "sell" rating.
On the charts, AMZN has surrendered roughly 16% so far in 2014, and is struggling to muscle north of its aforementioned 50-week trendline. Off the charts, Amazon.com, Inc. (NASDAQ:AMZN) is turning the proverbial screws on Time Warner Inc (NYSE:TWX) amid contract negotiations. Should AMZN backpedal in the face of former support -- or cool off amid escalating competition from Alibaba Group -- a mass exodus of option bulls and/or a wave of negative analyst attention could exacerbate selling pressure on the e-commerce concern.