Amazon seems to be turning out to be the biggest beast of this earnings season! The online retail giant crushed the estimates, income surged 62%, and the company predicted 20-35% growth in revenue for the current quarter. The shares are responding dramatically, higher by 24%! (AMZN $116.28 +22.85)
This report is obviously warming investors today to the shares but the next quarter’s earnings report, which will include holiday sales becomes absolutely critical. Those earnings have typically been delivered after January expiration, so unfortunately the January 2010 options most likely won’t give exposure to the earnings release. We will have a macro sense of consumer spending but not what percentage of that retail traffic Amazon has captured! Option traders who would like to capture that future event will have to trade out in April expiration.
The OptionsHouse hotlist is seeing huge volume in the options, over 370,000 contracts trading today already! Looking at the OptionsHouse option chain we can see 4000 of the April 135 calls trading, predominately on the bid side, actually indicating selling interest. This may be the action of covered call sellers. Traders who are long the stock and overwrite an upside call take in a premium while limiting the upside to price appreciation above strike.
To learn more about the covered call strategy join the OptionsHouse weekly webinar series “2 Traders 1 Strategy” Tuesday, October 27, at 4:30 EST. Jared Levy, Senior Derivatives Specialist for OptionsHouse parent company PEAK6 Investments, L.P., and I will discuss all the ins and outs of this popular strategy. Click here to register.
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