Buy This FAANG Stock Now

AMZN's short-term options are attractively priced at the moment

Nov 16, 2017 at 11:13 AM
facebook X logo linkedin, Inc. (NASDAQ:AMZN) has been flying high in 2017, with the shares boasting a 50.9% year-to-date lead. This momentum is continuing today, too, with AMZN up 0.4% at $1,131.75 -- within striking distance of Monday's record peak of $1,139.90 -- and if history is any guide, the FAANG stock could be carving out new highs for the Thanksgiving holiday.

According to Schaeffer's Senior Quantitative Analyst Rocky White, Amazon is one of the best stocks to own on the S&P 500 Index (SPX) during Thanksgiving week, looking back over the past 10 years. Specifically, the e-tailer has averaged a gain of 3.56%, and has finished the week positive 90% of the time. Based on the stock's current perch, a move of this magnitude would put Amazon near the $1,178 per share mark.

Options traders would certainly like to see another positive Thanksgiving week return for AMZN stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 64,542 calls over the past two weeks, compared to 55,549 puts. The resultant call/put volume ratio of 1.18 ranks higher than 82% of all comparable readings taken in the last year.

Now appears to be an attractive time to bet on AMZN's next leg higher with options, too. While the stock's Schaeffer's Volatility Index (SVI) of 21% ranks lower than 67% of all comparable readings taken in the past year, its 30-day at-the-money implied volatility of 3.7% is perched in 17th annual percentile. These two volatility indicators suggest low expectations are being priced into Amazon's short-term options, a potential boon to premium buyers.

Optimism is swirling around Amazon outside of the options pits, too. While just 1.5% of the stock's float is sold short, 91% of covering analysts maintain a "buy" or better rating on the shares.

Traders and analysts alike will be keeping a close eye on the Jeff Bezos firm throughout the holiday shopping season, too, following last year's record-setting Cyber Monday sales. Plus, AMZN said yesterday it is lowering prices at Whole Foods ahead of the holidays, with bigger discounts for Prime members.


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