New High for Amazon Stock Attracts Rare Batch of Call Traders

Amazon calls are in focus today, with options traders targeting the stock's weekly 3/31 series

Mar 29, 2017 at 2:49 PM
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Amazon stock hit a fresh record high of $875 earlier, after MKM Partners said the shares are outperforming due to the company's "retail dominance," and that it remains "the best long-term growth story available to investors today." While fellow FANG stock Facebook Inc (NASDAQ:FB) also notched an all-time peak after Barclays waxed optimistic over the "golden era" in mobile, AMZN stock was last seen trading up 2.1% at $874.20. Amid today's notable price action, AMZN options traders are piling on, with more than 138,000 contracts traded so far, two times what's typically seen at this point in the day.

Drilling down, more than 77,000 calls have changed hands, compared to 62,000 puts. Each of AMZN's 10 most active options expire at this Friday's close, with the weekly 3/31 870-strike call in the lead. Nearly 6,300 options have traded here, and there seems to be a mix of buy- and sell-to-open activity occurring. Those purchasing the calls to open expect AMZN to extend its record-setting run through week's end, while those writing the calls are betting the stock settles the week south of the strike.

More broadly, it's been put buyers who have been active in AMZN's options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 88,844 puts have been bought to open on AMZN stock in the last 10 trading sessions, versus 74,713 calls. Plus, the resultant put/call volume ratio of 1.19 ranks 3 percentage points from a 52-week peak.

Data shows options buyers have paid particular attention to the weekly 3/31 830-strike put in the past two weeks. Given the deep out-of-the-money status of this strike, it's possible that shareholders bought to open the puts to protect paper profits against any potential downside. However, AMZN's weekly 3/31 840-strike put has seen the biggest rise in open interest over the past two weeks, and is now home to the stock's top open interest position, with 4,323 contracts outstanding. Significant sell-to-open activity has been detected here, meaning speculators expect $840 to hold as support through Friday's close.

Looking at the charts, the $840 region has been a significant layer of support for AMZN stock since mid-February, and currently coincides with its 40-day moving average. The security's recent pullback to this trendline is noteworthy, too, per data from Schaeffer's Senior Quantitative Analyst Rocky White. In fact, in the 11 other times this signal has occurred in the last three years, Amazon has averaged a gain of 5% in the subsequent 21-day trading period, and has been positive 82% of the time. What's more, AMZN has been one of the best stocks to own in the second quarter over the last decade -- averaging a 13.3% return, and turning in a positive monthly performance eight times.

amzn stock daily price chart

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