New AMZN Trade

• stevenplace
• July 22nd, 2010

AMZN reports tonight. Should be interesting. Overall tech has been a mixed back of results, with no real blowouts one way or the other.

On the technical side, there was buying support that came in amzn on that failed breakdown, and there’s most likely some resistance from the moving averages and the trendline resistance.

The bollinger bands are indicating a contraction in volatility, and they give us a pretty good expecation of where AMZN should be tomorrow.

Volatility has been a sale except for the one blowout back in october. I’m not expecting a strong move either way. But, once again, here is the interesting part:

The front week volatility is very, very elevated relative to the next month options. So it makes sense to get into a double calendar spread. Here’s what we’ll do:

The front week options are pricing in a move to either 113 or 127 by tomorrow. So what we will do is get into calendar spreads right around those breakeven prices. That way, if the option market was fairly priced, we will se a move in that magnitude tomorrow.



BUY +5 CALENDAR AMZN 100 AUG 10/JUL4 10 125 CALL @1.85 LMT

BUY +5 CALENDAR AMZN 100 AUG 10/JUL4 10 110 PUT @1.70 LMT

These are front week options that you are selling.

Once again, the pain point is going to be the short front month contract in the direction of the move.

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