Who Likes AMZN Puts Here?

I want to run an idea past you guys to see what you think. We've seen some pretty flabbergasting moves so far this earnings season, especially on Friday with GOOG (disclosure: I'm long) closing up $122 a share and CMG (which I don't own, sadly) closing up $70 a share. So I'm looking around thinking to myself that somebody is due to take a fall, and I'm wondering if that somebody isn't Amazon.

The stock's been on a tear lately (I sold out at $305, dammit) and the company releases their earnings at the close on Thursday. I have to believe that a miss would mean a pretty significant drop in the stock price, if the moves we've seen thus far are any indication. So I'm taking a look at the puts.

The puts are, in a word, spendy. Which could imply that plenty of people think the stock is overvalued here, and are driving the price of the puts up rather than shorting the stock itself. The put that makes the most sense to me is the weekly $325 for under $10, or less than $1,000 each.

So essentially you're betting on an earnings miss, and a miss that would be punishing to the tune of at least $14 a share. When you think about it, that's not all that significant. The stock was up $18 a share on Friday alone, on no news.

So who thinks this is a worthwhile bet? I was talking to Patrick about it, and he seemed to think that the drop in Fed Ex's earnings last month might make it a decent correlation play (the thinking being that they're both in the distribution business, so if one is soft it stands to reason that the other might be).

Admittedly, I just fishing for a trade here. I'm still kinda pissed about missing CMG after having written about it only two weeks ago, so I'm gonna need you guys to do a better job of convincing me one way or the other on this AMZN short than you did on that CMG long.

What say you, WSO?

 

I wouldn't do it. If they barely beat on revenue or earnings I can see the stock jumping 5-10% - people are chasing the rally and I don't think we are done yet.

Be boring and buy some GE like I did a few months ago...loving that trade right now.

Oh, and I am buying some long dated Tesla puts today for the record. Jan 2015 $100s....

 

Coincedentally was thinking about Amazon's business yesterday, but generally, not in the context of a trade/investment. My Kindle broke last night (only had it for a few weeks, and there is a software glitch in it)- called them, and within two minutes they told me a replacement would be with me by Wednesday. Great customer service experience. Reminded me how extraordinarily slim their profit margins are though- given lacklustre consumer spending etc, any significant drop in revenue would translate to a pretty significant drop in earnings and potentially an earnings miss. I think your trade is a pretty good idea- I vote for trying it.

Can you explain this line? "The put that makes the most sense to me is the weekly $325 for under $10, or less than $1,000 each." I've taken my Futures & Options class, but I'm a little confused by it. What do you mean by the less than $1000 each?

 
notthehospitalER:

Can you explain this line? "The put that makes the most sense to me is the weekly $325 for under $10, or less than $1,000 each." I've taken my Futures & Options class, but I'm a little confused by it. What do you mean by the less than $1000 each?

Okay, I'm talking weekly options because the regular monthly options expired last Friday. The $325 strike price PUTs are ~$10 apiece and represent 100 shares, so $10 x 100 = $1,000.

 

Not speaking to if it's a good trade or not but if you wanted to make a put play on AMZN for their earnings why not do a vertical spread considering how pricy the options are? I'm looking at last prices for the weekly options and you could buy the 330 at 11.80 sell the 325 at 9.15 (so your paying 2.65) and if the stock does fall it only needs to fall 5 pts from where it is now for you to make 2.35 or 88% instead of needing it to fall 15 pts before you even break even. Please note these are last prices so I"m sure they'll change as of the open but right now that's my only reference.

Yeah your upside is capped but I'd take a chance at 88% return for 5 days work any day.

Give me a kid whose smart, poor, and hungry...............
 
jmoney2405:

Not speaking to if it's a good trade or not but if you wanted to make a put play on AMZN for their earnings why not do a vertical spread considering how pricy the options are? I'm looking at last prices for the weekly options and you could buy the 330 at 11.80 sell the 325 at 9.15 (so your paying 2.65) and if the stock does fall it only needs to fall 5 pts from where it is now for you to make 2.35 or 88% instead of needing it to fall 15 pts before you even break even. Please note these are last prices so I"m sure they'll change as of the open but right now that's my only reference.

Yeah your upside is capped but I'd take a chance at 88% return for 5 days work any day.

Haven't done much homework on Amazon lately, but their margins and the possibility of states starting to tax their transactions kept scaring me away from buying (I'm clearly too conservative for today's investors).

That being said, as I read your post it felt a little too much like a speculative homer or nothing play to me (again, I'm conservative). However, I like Jmoney's take on the trade quite a bit more.

twitter: @CorpFin_Guy
 

I'm just an observer to AMZN and don't know enough to speculate on prices. I do agree with babyj that AAPL is more likely to be a short play, and a few big names have already pulled their money out. The question becomes WHEN we'll see a dip. There's also the possibility that AAPL uses its huge cash hoard to buy out some profitable ideas and reinvent itself as a conglomerate, so I'm going to be content putting half my cash in ETF's and using the rest to chase 1% per week on noise trades.

Get busy living
 

If you are going to burn your cash, go to the casino. it's a lot more fun.

So what are you doing here? Ok let's say you are buying the 325 @ 12.95 offer - that's already USD 1295 you've just spent on one contract (add your comms, so maybe 5-10 dollars.

You need the stock to move 4% to break even. That is a fat move. Right before earnings the stock has been showing average daily move of 2.25% in the last 15 days and that's what the market seem to be more or less pricing, so you are cleverer than the general market here, or you are grossly overpaying.

Also what you gonna do? Unwind it before its November expiry right? Your time value is going down in a straight line on this guy, so in the 5 days of carry, you are going to lose all of that already.

Let's assume your thing plays out, you have to unwind after earnings. You think you gonna get a good bid, there will be a lot less demand and this will be assumed?

Am about to head - but don't use options for a lottery ticket. Unless you have a VERY strong hunch.

Trade it via a spread? Don't waste your time. Just short the stock.

 

What is your investment thesis?

Is your thesis supported by fundamentals?

What are the catalysts?

What does technical analysis say, and why?

The problem with Amazon is that its stock price performance is heavily linked to whatever Jeff Bezos deems relevant at any given point in time. For a long time he relied on sales as a stock price driver, arguing that sales growth would eventually lead to higher profits. Consequently investors have jumped on the sales-bandwagon, ignoring that this company is already highly efficient but margins are low. “Eventually” it should fall, but when, how much and why is anyone’s guess.

DYEL
 
Best Response
Waving Wind:

What is your investment thesis?

Is your thesis supported by fundamentals?

What are the catalysts?

What does technical analysis say, and why?

The problem with Amazon is that its stock price performance is heavily linked to whatever Jeff Bezos deems relevant at any given point in time. For a long time he relied on sales as a stock price driver, arguing that sales growth would eventually lead to higher profits. Consequently investors have jumped on the sales-bandwagon, ignoring that this company is already highly efficient but margins are low. “Eventually” it should fall, but when, how much and why is anyone’s guess.

That's about the 10th comment in this post commenting on bull sht. Edmundo doesn't give a flying fluke whether the stock is going to perform or whatever. He is playing an event and has the scope of a normal trader. He isn't investing for his grandma here. The question is, will the stock jump or not based on some data coming out on Friday, data can be excellent or bad, question is how the market will take it. Not what Bezos is planning to have for dinner in 10 years.

 

".. question is how the market will take it."

Which is exactly my point, as Bezos is a huge factor in how investors have reacted in the past to earnings, events and whatnot. Often leading in a somewhat muzzled investor response.

DYEL
 

Et nam et esse recusandae quaerat beatae. Esse ut similique eos. Quibusdam cumque reprehenderit similique corrupti. Impedit quia omnis quaerat dolores nulla.

Voluptates qui eligendi quidem nesciunt a veritatis optio corrupti. Neque labore soluta repudiandae rerum aut ducimus occaecati. Non explicabo minima maiores quia ducimus quos debitis.

Qui facilis voluptatem amet vel accusamus et omnis. Amet doloribus consectetur expedita necessitatibus qui. Eos rerum dolor ut dolore dolores. Sunt saepe perferendis perspiciatis et natus.

 

Enim blanditiis accusamus qui accusamus. In perspiciatis sunt nemo est atque animi corrupti. Praesentium aut nam quos ad dolorem aliquid aut.

Dolores recusandae aspernatur veritatis molestias nesciunt hic nam. Aut quod neque minus at qui. Aut delectus et rerum optio aut. Ullam consequatur quibusdam suscipit voluptatem facilis et. Magni accusantium impedit quas non asperiores. Ducimus molestiae similique facere corrupti omnis autem qui maxime. Iure aut enim soluta dolores dolorum ut.

Id quaerat explicabo culpa dolor nobis. Veritatis ut ut tempora doloribus repellendus. Sapiente accusantium nam voluptatem distinctio quas sint. Quia molestiae consequuntur praesentium odit similique commodi. In ut repudiandae praesentium non sint et officia. Officia et aut eaque blanditiis. Error quia expedita beatae.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
dosk17's picture
dosk17
98.9
6
CompBanker's picture
CompBanker
98.9
7
kanon's picture
kanon
98.9
8
GameTheory's picture
GameTheory
98.9
9
DrApeman's picture
DrApeman
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”