Filed under: Major movement, Good news, Amazon.com (AMZN), Options, Technical Analysis
Amazon.com Inc. (NASDAQ: AMZN) shares are rising today after the online retail giant announced a multi-billion dollar stock and debt buyback plan this morning. The company will retire debt worth $1.25 billion and will buy back up to $1 billion in common stock over the next two years. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AMZN.
After hitting a one-year low of $37.04 in March, the stock hit a one-year high of $101.09 in October. AMZN opened this morning at $73.40. So far today the stock has hit a low of $72.67 and a high of $74.60. As of 10:20, AMZN is trading at $74.07, up $3.16 (4.5%). The chart for AMZN looks bearish but improving slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a March bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 4.4% return in just six weeks as long as AMZN is above $55 at March expiration. Amazon would have to fall by more than 22% before we would start to lose money. Learn more about this type of trade here.
Continue reading Amazon.com (AMZN) soars on buyback plan
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