Unusual Options Activity: Amazon (AMZN)

Tech giant Amazon (AMZN) is up about 60 percent over the past year, and the company is holding up well as retail is showing signs of strength this holiday season. However, one trader is betting shares may be done moving higher.

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  • That’s based on the February $180 puts. With 78 days until expiration, 3,864 contracts traded compared to a prior open interest of 104, for a 37-fold rise in volume on the trade. The buyer of the puts paid $32.65.

    Amazon shares recently traded for about $147, making the option about $33 in-the-money. Amazon is right near its 52-week high of $149.26.

    Amazon has performed well this year, thanks to strong performance with its cloud services. Revenues are up 13 percent, and earnings have jumped 244 percent.

    While Amazon has never been valued much like a traditional stock over the years, shares have gone from trading at 100 times earnings a year ago, to about 40 times forward earnings today.

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  • Action to take: Shares are trending higher, but the markets may take a quick pause before a final year-end push. Interested investors should wait to add shares on a down day.

    For traders, the February puts are already deep in-the-money, and could see a low double-digit increase from even a modest pullback in the coming days. Traders should look to take quick profits and not get caught on the short side in the final weeks of the year.


    Disclosure: The author of this article has a position in the company mentioned here, but does not intend to further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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