Collect Cash Waiting To Buy Amazon...Hey guys! Today, we're looking at a Trade Idea in Amazon, the giga-cap tech company and retail behemoth.
Like most of our trade ideas, this post focuses on selling put options - this time, on NASDAQ:AMZN shares.
In case you're unfamiliar with options -> when you sell a put option, one of two things happens.
Either;
A.) The stock price finishes above the strike price of the put when the put expires, in which case you make money.
B.) The stock price finishes below the strike price of the put when the put expires, in which case you’re forced to buy the stock at the strike price.
With the trades we publish, if the stock goes up, sideways, or down a bit, you'll make money. If the stock goes down a lot, then you'll be forced to buy shares.
In other words - either make money, or buy the dip!
The trick is finding the right stock at the right time.
Right now, Amazon seems like a great candidate for this strategy.
Selling the September 22nd, $131 strike put options yields more than 13.4% on an annualized basis, and the company is well positioned for a trade like this.
The company recently reported results, and they were good, showing a continued rebound in FCF and top line growth:
The company is still diluting shareholders at quite a rate, which isn't the best thing in the world, but it's alright considering the overall demand profile for the stock.
Otherwise, the stock continues to be in a strong bull trend, which supports a bullish option play:
On top of this, the company recently reported earnings and the stock jumped on the data, which could induce further PEAD, or Post-Earnings-Announcement-Drift:
Given that this trade idea has a 77% chance of finishing profitably over the next 43 days, we think its a solid balance of risk and reward. Worst case? You're holding Amazon, one of the best companies in the world.
Cheers!
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