Amazon (AMZN) is currently trading at all time highs today, with the high of the day coming in at $3682 just before 3:00 p.m. Eastern Standard Time.
AMZN announced the official take over of Andy Jassy as new CEO from Jeff Bezos. Jassy has been with the company for over 20 years, in which he has founded and led Amazon Web Services. Markets Insider reports that Jassy seems to be “doubling down” on Bezo’s customer first attitude, in which Jassy emphasized speed and delivery times in his first companywide email sent. 1
With Amazons huge move today, its market cap is now above $1.8 Trillion, and if the move holds, $2 could be just around the corner.
Go to the Chart
Coming into the week options traders were pricing in an expected move of around $55 dollars by this Friday. Obviously a 3x expected move shot us up more than $164 from Friday’s close, as we breached straight through our 100% Fib level as seen here on the Daily. We have mentioned yesterday that the 100% Fib was definitely in play this week, but no one could have expected a move such as this.
Because of quick breach, to get a better look at the moves in here today, we will dig into the 30m Chart, found below.
What started this morning as a good old gap and go, ended up fizzling out just a tad around 11:00 a.m. this morning. Tight consolidation and a bounce just off the $3600 level brought us to a break out at 1:30 and saw us grinding higher. Obviously with these types of moves, the RSI increases dramatically, as the 9 EMA and stock price start to diverge and separate.
Going forward what we would like to see is a slight cooling off here before we work our way to the inevitable $3700 range, but FOMO may be setting in.
In our options chain, we have found a huge influx of Call contracts being traded and opened today, especially in the weekly cycle. 58k of which, are at the 3700 mark. The expected move by Friday we mentioned earlier has grown to $90, with the Standard deviation Options being at the 3820 Calls and the 3555 Puts. Call skew has increased by almost $2.00 as well in this weekly cycle.
Have No Fear, Here’s a Trade Idea
For those who may have missed out on the run today, wee have tricky play here, in a stock where Volatility did increase some, but to the upside, with added Call Skew, and with earnings coming in the next month. So what can we do?
Obviously it all depends on your risk profile and assumption. On large up moves like this though, I like to play Big wide Iron Condors. With Iron Condors you can stay neutral if you want, hoping for a slight consolidation, you can skew to the upside, looking for that run into earnings, or you can skew your Delta’s to the down side, believing a pull back is inevitable after today’s move. Even though Iron Condor’s can be tricky to defend, the strategy still gives us some options when playing some uncertainty in a stock.
To take full advantage of a decrease in IV, yet be safe, we are going to be headed out to the August Cycle. In August we are looking at buying the $3400 Put and selling the 3450, and selling the 4000 Call and buying the 4050 Call.
This would give us a Neutral Delta, along with a Theta of 18.4, and a Credit Rcvd of 20.10$. The plan for this trade is to close before earnings on the 29th. We are looking to take advantage of the large IV and look for a contraction, as well as put time decay in our favor. This is the most cost effective way to place a non-directional trade on in a Stock that is coming off of such a large move.
Could this just be the beginning of a larger move setting up for earnings on the 29th? Or was the break of the CEO news just enough to break us through those choppy 3500s? How would you play this stock going forward?