Amazon.com (AMZN) is off 21 cents to $194.21 ahead of earnings and spot volume of 4.3 million shares is only about 5 percent more than the daily average for the online retailer. But options volume is projected to reach 173,000 contracts, which is almost 2X the daily average. Players are jockeying for position ahead of the report and, as a result, 54 percent of the volume is in the 4/27 weeklys. Downside 180 and 175 puts are the most actives, followed by the upside 215 and 210 calls. About 11.5 percent of the flow is in Weekly 5/2 calls and 23 percent in May. Therefore, less than 12 percent of the volume in AMZN today is beyond the front-month May options. At the same time, the weekly straddle is trading at 7% of spot and a one sigma post-earnings range for the stock based on skew is $175.4 to $215.5. Shares fell 7.7 percent when earnings were last reported and have seen average daily post-earnings moves of 8 percent over the past four quarters.
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.