Exploring Amazon.com (AMZN) Options Trading for May 31st Exploring Amazon.com (AMZN) Options Trading for May 31st

Written By Michael Gary Scott

Delving into Options Trading Strategies for AMZN Stock

Options trading for Amazon.com Inc (Symbol: AMZN) during the first week of May has stirred up intriguing possibilities. With new options for the May 31st expiration entering the market, investors are presented with a fascinating landscape of potential strategies.

Unlocking the Power of Put Options

One notable opportunity lies in the put contract at the $160.00 strike price, currently commanding a bid of $1.00. By opting to sell-to-open this put contract, investors are venturing into a realm where they commit to acquiring the stock at $160.00, yet simultaneously reap the premium. This move effectively pegs the cost basis of the shares at $159.00, offering a compelling alternative to the present stock price of $187.27.

Given that the $160.00 strike reflects a substantial 15% discount to the current stock price, there is a chance the put contract might expire without value. Statistical data indicate a 90% probability of this outcome. Such dynamics pave the way for insightful decision-making, as investors navigate through the fluctuating realm of options trading.

Understanding the Call Option Landscape

On the calls side, attention is drawn to the call contract at the $190.00 strike price, boasting a bid of $8.45. Engaging in a “covered call” strategy involves purchasing AMZN shares at $187.27 and subsequently selling-to-open the call contract at $190.00. Through this maneuver, investors commit to offloading the stock at the specified price, amplifying total returns by 5.97% if the stock gets summoned at the May 31st expiration.

As investors weigh the potential outcomes, considering historical trading patterns and fundamental business insights becomes paramount. The $190.00 strike epitomizes a minute 1% premium to the present stock value, hinting at nuanced probabilities for the covered call contract. The current data suggest a 49% likelihood of the contract expiring devoid of value, paving the way for nuanced discussions around risk and return.

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Analyzing Volatility Dynamics

Implied volatility stands at 38% for the put contract and 34% for the call contract scenarios. In contrast, the actual trailing twelve-month volatility, factoring the closing values of the past 251 trading days and the current price of $187.27, totals 29%. These figures illuminate the dynamic nature of options trading, where fluctuations and uncertainties intertwine in a tapestry of financial strategy.

Amidst this backdrop, investors are encouraged to explore a spectrum of put and call options contract ideas, delving into the realm of potential strategies that can shape their investment journeys.

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