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Bears Turn Their Attention Toward Amazon.com, Inc. (AMZN)

Puts have gained in popularity in AMZN's options pits

by 7/31/2013 10:29 AM
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Amazon.com, Inc. (NASDAQ:AMZN) option players have shown a preference for puts over calls lately, per data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). Specifically, traders at these exchanges have bought to open 33,399 puts during the past five sessions, compared to 28,107 calls, netting AMZN a bearishly skewed five-day put/call volume ratio of 1.19.

This pessimistic slant is also evident from a longer-term perspective. Since July 1, Amazon's 10-day put/call volume ratio at the ISE, CBOE, and NASDAQ OMX PHLX (PHLX) has risen to 1.12 from 0.89. What's more, this current ratio ranks higher than 78% of similar readings taken in the past year, meaning puts have been bought to open over calls at an accelerated clip of late.

As such, the stock's Schaeffer's put/call open interest ratio (SOIR) has moved to 1.10 from its July 22 reading of 1.04, as put open interest among options expiring in three months or less jumped 37.6%. While this ratio still ranks in the call-skewed 13th percentile of its annual range, it does point to an increasing presence of put players in AMZN's short-term options pits.

The skepticism toward Amazon is a bit puzzling, considering the stock has tacked on a formidable 21.1% in 2013. However, the security pulled back in the early half of this week, after hitting a record peak of $313.62 last Friday on the heels of its quarterly report. The stock found a foothold in the form of its 20-day moving average, and a solid bounce off of this supportive level helped AMZN resume its uptrend. In today's session, the equity was up 0.1% to trade at $302.57.

In light of AMZN's withstanding technical prowess, this recent uptick in put activity could simply be shareholders picking up some protection against any more potential downside. With Amazon.com, Inc.'s (NASDAQ:AMZN) earnings report out of the way, now appears to be an opportune time to scoop up options-related insurance at a bargain. The stock's Schaeffer's Volatility Index (SVI) of 23% ranks lower than 93% of other such readings taken in the last year. Simply stated, short-term options are relatively inexpensive at the moment.


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