Call Options Or Put Options On Amazon.com (AMZN)?

| December 3, 2014 | 0 Comments

Amazon.comI’m sure you’re familiar with Amazon.com (AMZN), as it’s the world’s largest online retailer. The company is in the spotlight with record spending on this year’s Cyber Monday.

AMZN shares are currently trading at $317.20, down 18% year-to-date. The stock is trading 22% below the 52-week high of $408.06 and is 12% above the 52-week low of $284.00.

Is this an opportunity to buy call options on AMZN because of the huge spending on online shopping this year? Or should you buy put options on AMZN because the stock is too expensive? 

The bulls make a convincing argument…

We just had a record Cyber Monday this week with more than $2 billion spent online. Of course, no company generates more revenues online than Amazon.com.

This year, AMZN even has a fleet of robots in warehouses to help streamline the delivery process. You can bet the company is going to have some kind of special fourth quarter.

Moreover, the company just issued $6 billion worth of bonds. The money will be used for drone delivery research, television programming, smartphones, and more. Any one of these new products could turn into millions of profits down the line.

But the bears have a compelling case as well… 

Despite generating boatloads of revenue, AMZN still doesn’t have much to show in the profit department. Even this past quarter, the company actually lost money.

What’s more, the stock is trading at an astronomical 367x projected earnings. And, CEO Bezos has no intention on focusing on profits anytime soon.

The company will spend millions on potentially losing projects, like drones and smartphones. The AMZN Fire Phone has already been a big bust, with $170 million taken in inventory write-downs.

So is it time to be bullish on AMZN due to massive online spending this year or do you take a bearish position because turning profits are more important?

If you think the bulls are right, take a look at buying the AMZN January 17th 350 calls for around $2.60. 

If you think the bears are right, take a look at buying the AMZN January 17th 280 puts for around $2.40.  

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.
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