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Schaeffer's Daily Option Blog, Inc. (AMZN) Attracts a Fresh Crop of Option Bulls

AMZN optimists are opting for soon-to-expire weekly call options

by 3/27/2013 10:49 AM
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Online retailer, Inc. (NASDAQ:AMZN - 264.35) is bucking the broad-market trend lower this morning, extending its week-to-date lead to more than 2.4%. What's more, the options crowd is gambling on even more upside this holiday-shortened week, with speculators scooping up soon-to-expire calls at a rapid-fire rate. So far today, AMZN has seen more than 12,000 calls change hands -- about 55% more than its average intraday volume, and transpiring mostly at weekly strikes.

Most popular are the weekly 3/28 260- and 265-strike calls, which have seen around 3,300 and 2,200 contracts cross the tape, respectively. Implied volatility is notably higher at both strikes, and the majority of the calls have traded on the ask side, pointing to newly bought bullish bets.

The volume-weighted average price (VWAP) of the 260-strike calls is $3.33, meaning the buyers' profit will increase the higher rallies north of $263.33 (strike price plus VWAP) by tomorrow's closing bell. Already today, the shares have soared as high as the $265.04 level, so it appears the call buyers are in good shape thus far. Meanwhile, the VWAP of the 265-strike calls is $1.18, indicating a breakeven of $266.18 for the buyers. Risk is capped at the initial premium paid for the calls.

At last check, the shares of Amazon are up roughly 1.5% to hang out in the $264.35 region. Since touching a record high of $284.72 in January, AMZN has given back around 7.2%, but found support atop its 10-month moving average. This trendline, along with its 20-month cohort, has helped the security more than triple in value since March 2009.


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