Netflix Challenge Excites Amazon.com, Inc. (AMZN) Options Bulls

Amazon.com, Inc. (NASDAQ:AMZN) call options are trading at an accelerated rate after the company announced its new standalone video service

by Josh Selway

Published on Apr 18, 2016 at 11:00 AM
Updated on Jun 24, 2020 at 10:16 AM

Amazon.com, Inc. (NASDAQ:AMZN) call options are trading above the average intraday pace this morning. The company is in the news after announcing a new standalone video service to compete with Netflix, Inc. (NASDAQ:NFLX). As such -- and ahead of Thursday's earnings report -- AMZN is up 1.5% at $635.50. 

AMZN's weekly 4/22 series accounts for nine of the 10 most popular strikes, with the 640-strike call taking the top spot. Buy-to-open activity has been detected here, meaning the buyers are betting on AMZN topping $640 -- territory not charted since early January -- by week's end, when the contracts expire. 

This call bias is unusual for short-term AMZN speculators. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) stands at an annual high of 1.42. Said differently, options traders targeting contracts with a lifespan of three months or less are more put-skewed than at any other point during the past 12 months. 

There's little pessimism outside the options pits, though. AMZN's short-interest ratio sits at a low 1.50, while 83% of covering brokerage firms recommend buying the stock, and none consider it a "sell." Moreover, AMZN's average 12-month price target stands at $732.78 -- a 15% premium to current levels and territory never before explored. 

Technically speaking, Amazon.com, Inc. (NASDAQ:AMZN) has been strong in recent weeks, amid a flurry of headlines. The stock has gained over 34% since its year-to-date low of $474 from early February, and has outperformed the broader S&P 500 Index (SPX) by nearly 12 percentage points in the past month.

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