Amazon Call Buying Heats Up Ahead Of Holiday Season

AMZN options traders are more bullish than usual as Black Friday looms

Managing Editor
Nov 10, 2017 at 12:19 PM
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Amazon.com, Inc. (NASDAQ:AMZN), fresh off an earnings victory two weeks ago, reported yesterday that pop-up shops would be appearing at select Whole Foods Stores during the holidays. The e-commerce giant will be facing a fierce battle this Black Friday, as brick-and-mortar retail stores such as Walmart (WMT) and Best Buy (BBY) attempt to get a head-start on sales this season. Meanwhile, a couple of pharmacy stocks are edging higher on reports Amazon may not be entering the drug maker. Below, we will take a look AMZN ahead of the holiday shopping season, and examine how options traders have been lining up on the FAANG stock.

While Amazon stock is currently down 0.2% to trade at $1,126.98, the e-commerce shares touched a record high of $1,135.54 on Wednesday. AMZN has tacked on 50% year-to-date, and the shares' 10-day moving average has provided support since their post-earnings bull gap on Oct. 30. However, a short-term breather may have been in the cards; AMZN stock sports a 14-day Relative Strength Index (RSI) of 76, firmly in "overbought" territory.

In the options pits, call buying has been quite popular, relative to put buying in the past 10 days. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AMZN sports a 10-day call/put volume ratio of 1.22, which ranks in the 90th percentile of its annual range. This indicates options traders have shown a healthier-than-usual appetite for bullish bets over bearish during the past couple of weeks.

Digging deeper, however, puts have seen the biggest open interest increases in the past 10 days, excluding options that already expired. Specifically, the November 1,100 put and deeper out-of-the-money December 1,075 put generated the most accumulations.

The good news for options traders is that regardless of direction, it's a prime time to buy premium on short-term AMZN options. The stock's Schaeffer's Volatility Index (SVI) of 18% ranks in the low 19th percentile of all similar readings taken in the past year, implying low volatility expectations are being priced into near-term contracts. Furthermore, its Schaeffer's Volatility Scorecard (SVS) is perched at a respectable 73. In other words, the equity has made outsized moves over the past year, relative to what the options market has expected.

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