Call Traders Keep Faith In Amazon Ahead of Earnings

Options activity has been bullish on Amazon before earnings

Jan 30, 2019 at 12:42 PM
facebook twitter linkedin, Inc. (NASDAQ:AMZN) will be reporting earnings after the close tomorrow, Jan. 31, and the stock will look to avoid a second straight post-earnings slide. For instance, the shares fell 7.8% the day after earnings last quarter, their largest single-day earnings loss in at least two years. In fact, AMZN hasn't moved lower the day after earnings in consecutive quarters during that two-year time span.

Meanwhile, the options market is expecting another outsized earnings move, pricing in an 8.7% swing for Friday's session. That's compared to an average post-earnings move of just 4.3% over the past two years, regardless of direction. And as we noted last Friday, AMZN options traders have been showing bullish tendencies, with the 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) now standing at 1.32, just 9 percentage points from a 12-month bullish extreme.

Zeroing in on short-term speculators, the call-skew is just as strong, based on the Schaeffer's put/call open interest ratio (SOIR) of 0.84, which ranks in the low 2nd annual percentile. Near-term calls home to heavy open interest include the 1,700, 1,800, and 2,000 strikes in the February series, the 1,700 strike in the March series, and the 1,700 strike in the April series.

The FAANG stock was last seen trading up 3.1% at $1,643.89, likely getting some help from a round of upbeat corporate earnings and a price-target hike to $2,300 from $2,250 at BMO. While Amazon shares are holding just below the 80-day moving average, the flattening 50-day moving average has stepped up as support in recent weeks.

amazon stock chart


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