Amazon.com, Inc. (AMZN) Option Traders Chase Bargains After Grocery News

Amazon.com, Inc. (AMZN) announced a checkout-free grocery store concept, and option players are hopping on amid low premiums

Dec 5, 2016 at 3:46 PM
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Once again, Amazon.com, Inc. (NASDAQ:AMZN) is raising the bar on industry standards. This time, though, the online retail giant is attempting to capture customers who seek a more convenient brick-and-mortar grocery shopping experience, announcing today that it has opened the Amazon Go grocery store in Seattle. The store uses sensors to detect what customers have picked up, and charges the purchased items to their Amazon account, eliminating the need for lines and cashiers. AMZN stock is trading up 2.7% at $760.66 so far today, taking part in a wider tech rally, and some traders are betting on more upside by picking up near-term options at a bargain.

Longer term, the stock is up roughly 60% since its February lows, and even notched an all-time high of $847.21 in October, before pulling back slightly. What's more, AMZN recently touched its 160-day moving average, which has been a bullish indicator in the past.

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Option traders have been quick to hop on the bullish bandwagon today, with potential buy-to-open activity spotted at the weekly 12/9 750-, 760-, and 770-strike calls, indicating the buyers see continued upside for AMZN through the end of the week. Widening the scope a bit, the December 850 call is the top front-month open interest position, followed by the December 800 call. With these two options well out of the money, they present little in the way of options-related resistance in the near-term, suggesting AMZN could be relatively unimpeded on that front.

Not all AMZN option players are of the bullish variety, however. AMZN's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 0.91, in the top 78% of all readings from the last 12 months. In other words, option buyers have picked up AMZN puts over calls at a faster-than-usual clip during the past 10 weeks.

What's more, AMZN's 30-day put/call implied volatility skew of  7.6% sits lower than 97% of all other readings from the past 12 months, indicating AMZN's short-term puts have rarely been cheaper relative to near-term call options. AMZN's near-term options are generally attractively priced right now, though, with Amazon.com, Inc.'s (NASDAQ:AMZN) Schaeffer's Volatility Index (SVI) of 23% sitting in the bottom quartile of its annual range, suggesting near-term traders are pricing in relatively low volatility expectations.

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