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Option Brief: Amazon.com, Inc. (NASDAQ:AMZN) is up 2.2% at $378.65, after the online retailer said it's hiking the annual Prime membership fee by $20 to $99 -- the first increase in the nine-year history of the service -- beginning next week. Against this backdrop, AMZN options are in high demand today, with the stock's 30-day at-the-money implied volatility (IV) up 3.3% at 24.7%.
Calls are the options of choice, with roughly 36,000 contracts traded -- four times the intraday norm. Plus, short-term calls make up seven of the 10 most active strikes. Digging deeper, eleventh-hour bettors are picking up weekly 3/14 380- and 385-strike calls, which are the two most popular options thus far, with roughly 3,200 and 4,700 contracts exchanged. Most of the calls have traded on the ask side, IV is more than 10 percentage points higher at each strike, and volume has surpassed open interest on both weekly options -- all pointing to buy-to-open activity.
By purchasing the calls to open, the buyers expect Amazon.com to extend today's climb into tomorrow's session. Specifically, the calls will move into the money if the shares topple the respective strikes by tomorrow's close, when the options expire. Delta on the 380-strike calls has jumped to 0.46 from 0.08 at yesterday's close, suggesting about a 46% chance of the contracts being in the money at expiration. Likewise, delta on the 385-strike calls stands at 0.22, compared to just 0.03 last night.
Risk, meanwhile, is limited to the initial premium paid for the calls, should they remain out of the money through the end of the week. Comparatively speaking, Amazon.com, Inc.'s (NASDAQ:AMZN) short-term options are inexpensive right now, as the security's Schaeffer's Volatility Index (SVI) of 22% stands just 5 percentage points from an annual low.