Amazon.com, Inc. (AMZN) Rumors Spark a Mad Dash for Calls

Amazon.com, Inc. (AMZN) calls are flying off the shelves after reports of an Icahn stake

Jan 21, 2015 at 12:23 PM
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The shares of Amazon.com, Inc. (NASDAQ:AMZN) gapped higher around midday, peaking at $306, amid rumors -- since reportedly denied -- that Carl Icahn took a stake in the e-commerce giant. The stock is still flirting with a 2.7% gain at $297.20, and option bulls are gambling on more upside through the end of the week.

AMZN calls are trading at three times the average intraday pace, and the security's 30-day at-the-money implied volatility has popped 2.6% to 42.8%, reflecting the growing demand for short-term contracts. Digging deeper, it looks like short-term bulls are buying to open the weekly 1/23 295- and 300-strike calls, on hopes that AMZN will end the week north of the respective strikes.

Delta on the now in-the-money 295-strike call has more than doubled from yesterday's close, surging to 0.60 from 0.26. Meanwhile, delta on the 300-strike call more than tripled to 0.36 from 0.11. In other words, the 295- and 300-strike calls have about a 60% and 36% chance, respectively, of expiring in the money at Friday's close.

Today's appetite for bullish bets marks a change of pace among short-term options traders, though. AMZN's Schaeffer's put/call open interest ratio (SOIR) currently sits at an annual high of 1.68, suggesting near-term option players haven't been more put-heavy during the past year.

Thanks to today's jump -- which still pales in comparison to that of fellow independent entertainment producer Netflix, Inc. (NASDAQ:NFLX) -- Amazon.com, Inc. (NASDAQ:AMZN) is on pace to settle atop its 10-day moving average for the first time since Jan. 2. However, the equity's intraday upside was capped at its 40-day moving average -- a trendline that hasn't been defeated on a daily closing basis since Dec. 4.

Daily Chart of AMZN since October 2014 with 10-Day and 40-Day Moving Averages
 

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