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
facebook twitter linkedin


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
 

Now is the time to join our thriving community of Event Traders who consistently profit from every earnings season. With this discounted subscription opportunity, you'll stay ahead of the curve and seize opportunities others miss. Do not let Q3 earnings season pass you by – subscribe now and supercharge your portfolio with expert insights that turn market reactions into profit-generating opportunities!! Don't waste another second... join us right now before the next trade targeting +200% is released!