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Amazon.com, Inc. (AMZN) Entices Bearish Short-Term Traders

AMZN sees a rare uptick in near-term put volume

by 5/1/2013 2:14 PM
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Amazon.com, Inc. (NASDAQ:AMZN) is following the broader market lower today, which hasn't gone unnoticed by bearish traders. Around 33,000 puts have changed hands so far, which is a 44% increase over the norm. By comparison, about 25,000 calls have crossed the tape. It looks as though some of these speculators are expecting further declines for AMZN over the next couple of days.

Digging deeper, options players have taken a shine to the weekly 5/3 250 and 245 strikes, which have each seen roughly 4,500 put contracts exchanged -- the majority of them at the ask price, implying they were purchased. Since today's volume has exceeded current open interest levels at these strikes -- and implied volatility has climbed higher on both since the opening bell -- it's likely that fresh pessimistic bets are being initiated here.

In the case of the 250-strike calls, speculators are betting Amazon.com, Inc. (NASDAQ:AMZN) will retreat below $246.72 (strike price less the volume-weighted average price [VWAP] of $3.28) by this Friday's close, which is when these weekly options expire. Meanwhile, buyers of the 245-strike puts are expecting the stock to fall below breakeven at $243.45, or the strike price minus a VWAP of $1.55, within the same timeframe.

This campaign for puts over calls is a deviation from AMZN's recent trend. The equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 1.07, confirming calls bought to open have outweighed puts during the past two weeks. This ratio ranks higher than 74% of comparable 52-week readings, reflecting a healthier-than-usual appetite for bullish options over bearish.

AMZN has had a rough go of it on the charts lately, shedding more than 5% during the last four weeks, and trailing the broader S&P 500 Index (SPX) by north of 11 percentage points over the past two months. In fact, the stock declined about 7.2% on April 26 alone, after reporting weaker-than-expected quarterly revenue. What's more, the equity is on pace to finish the session below its 200-day moving average for the second time in three days; this trendline had previously acted as a floor for more than a year.

At last check, the stock is off about 2.2% to trade at $248.13.


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