Unusual Options Activity: Amazon (AMZN)

Technology giant Amazon (AMZN) has soared in the past year, surging 77% higher. One trader sees shares taking a breather over the coming months and giving back some of their recent gains.

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  • That’s based on the August $125 puts. With 137 days until expiration, 8,594 contracts traded compared to a prior open interest of 212, for a 41-fold rise in volume on the trade. The buyer of the puts paid $0.93 to make the bearish bet.

    Shares recently traded for about $180, meaning the stock would need to drop $55, or nearly 30%, for the option to move in-the-money. Amazon shares are nearly back to their all-time highs from late 2021.

    It’s certainly possible that moving back to the prior all-time high acts as a resistance point for shares, as traders look for clues as to where the stock can go next.

    Operationally, Amazon has been a strong performer. Revenues are up 14% in the last 12 months and earnings have soared.

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  • Action to take: Investors interested in shares may want to buy a partial stake now, to play the current momentum higher. If there is a break in shares, that would allow for further buys at a lower price.

    For traders, the August $125 puts will perform well amid a market selloff. Seasonally, we’re out of the market’s weak spot until the late summer after the options expire.

    Traders may be able to make a quick mid-double-digit profit on a down day for shares, but should look to play the upside for now.