Posts Tagged ‘AMZN’

Bullish and Neutral Options Strategies for Amazon.com (AMZN)

Wednesday, December 8th, 2010

Options strategies for Amazon.com Amazon.com (NASDAQ:AMZN) is in the business of selling Kindle e-readers, books, housewares, and just about everything in between (including the kitchen sink). In addition to its peddling of tangible goods, the retailing giant also generates revenue through credit-card services and marketing agreements.

The online business has dominated the e-business space for years, and this has been reflected in the share price. AMZN shares have gained more than 250% in the past five years and are up roughly 30% on a year-to-date basis.

Earlier this week, Credit Suisse upped its price target on the shares to $165 from $145 while maintaining a “neutral” rating on the stock. Perhaps the firm was playing a bit of catch-up with the stock bearing down on the $180 level. In a note to clients, Credit Suisse noted that Amazon has a strong gross and operation margins outlook. (more…)

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Getting an Edge on Jim Cramer

Tuesday, July 6th, 2010

For more than a year, I took Mad Money host Jim Cramer’s investing ideas and gave them a thumbs up or thumbs down according my own technical analysis and views.  Here at OptionsHouse, it’s not about telling you what to do, but rather offering some strategies for you to explore based on your own individual opinions.

We all have a right to agree or disagree with Cramer and while I have great respect for the man, I can’t say that I am in full agreement with all of his recommendations.  Furthermore, as options traders, we can take his thesis and augment it into acceptable risk for our individual personalities and risk tolerances.

Watching my DVR recording of Friday’s program, I actually liked what Cramer had to say about investing after the crash (I think this was taped earlier).  He talked about the difference between trading and investing and how today’s market participants perhaps need to be an amalgam of the two. I happen to agree with Cramer’s suggestion that traders learn as much as they can about a company, although even with soup-to-nuts knowledge of a company and its business, you can still find yourself in a losing position.  This is due to factors beyond the quality of a company’s product or their ability to sell that product or service to the public.  Cramer noted this when he talked about a company’s stock price becoming “un-glued” from its fundamentals.

Frankly, while I agree that huge variances from typical price-to-earnings (p/e) ratios may be a reason to buy or sell a stock, it still doesn’t ensure success. It may, however, increase the probability of a longer-term trade coming into profitability because of the anticipated “reversion to the mean” an overbought or oversold stock may experience. (more…)

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Amazon.com (AMZN) Strategies for Bulls and Bears

Monday, May 17th, 2010

Amazon KindleLate last week, Caris & Co. initiated coverage on four major Internet stocks: Google (NASDAQ: GOOG), eBay (NASDAQ: EBAY), Yahoo! (NASDAQ: YHOO), and Amazon.com (NASDAQ: AMZN).  GOOG was given an “average” rating but the other three were named a “buy.” For AMZN, the covering analyst gave the stock a 12-month price target of $164 (nearly 30% above the stock’s current price of $128.53).  He cited the online retailer’s potential for growth with the Kindle e-reader and Amazon Web Services, noting that these opportunities are backed by a strong e-commerce business model.

Investors who don’t want to spend nearly $13,000 on 100 shares could choose to trade the shares using one of many bullish option strategies.  Alternatively, those who disagree with the Caris analyst and who expect a reversal in the stock could use a bearish option strategy in lieu of shorting the stock (which can be a very risky endeavor).  Two hypothetical options trades – one bullish, one bearish – are described below.  Remember that these are merely examples, not recommendations.  Consider your own risk/reward parameters and trading style before executing any new trades. (more…)

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Finding Value in Earnings Announcements: How to Calculate a Price-to-Earnings Ratio

Monday, April 5th, 2010

Alcoa (AA) officially kicks off earnings season with its numbers release due out on April 12 this year. However, other key earnings reports starting this week will include Bed, Bath and Beyond (BBBY), Monsanto (MON), Family Dollar Stores (FDO) and Salesforce.com (CRM), amongst others. These announcements will likely set the tone for the markets and earnings season to come.

For many investors, earnings are the realization and confirmation of a company’s fiscal health and well-being, or an indicator of potential problems. Traders, analysts and experts alike often discuss price-to-earnings ratios (p/e ratio) and other factors when determining whether to buy, sell or hold a position.

Profit-to-Earnings Ratio equals price-per-share divided by annual earnings-per-share

The p/e ratio, price-to-earnings ratio, often referred to as “earnings multiple” or simply “multiple”, is simply the price of that stock divided by how much they earn. P/E ratios are not only stock specific, but certain types of companies and their respective sectors also posses p/e characteristics that investors use to measure expected performance. (more…)

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Four Key Events Could Make This an Exciting Week for the Market

Monday, January 25th, 2010

This week holds four potentially exciting catalysts; each with the potential to dominate business media headlines.  Is it any wonder that the VIX has spiked back above 25%?

  1. Wednesday night President Obama will deliver his State of the Union address
    Will Health Care remain in focus following the Massachusetts run-off election results?
    Will new Bank regulations and taxes receive a major emphasis?
    Any new initiatives on job creation stimulus?
  2. FED Chairman Ben Bernanke Confirmation vote expected before his term expires on January 31st
    This result will likely be known before it actually comes to a vote. I believe the market may not react well to any uncertainty of a non-confirmation vote
  3. FOMC meeting January 27
    What type of meeting would it be if the pre-confirmation tally turns further against Ben?
    Expectations are for no change to the Fed Funds targets but that decision has not been unanimous lately so the statement may change tone
  4. Earnings season is in full swing
    Apple earnings tonight and Tablet launch on Wednesday
    136 companies in the S&P 500 report including MSFT, JNJ, PG, CVX, T, AMZN and COP

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Amazon Surges to the top of the OptionsHouse Hot List

Friday, October 23rd, 2009

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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August Roundup: A Look at Some Specific Stocks Compared with Major Market Averages

Saturday, August 29th, 2009

With August almost in the books I believe it is worthwhile to look at some specific sectors and stocks relative to the major market averages.

For a reference point the SPX index started the year at a level of 903.25.  So with today’s close at 1028.93 the overall market is up almost 14%.  It is more impressive to remember that on March 9th the index closed at 676.53, after hitting a intra-day low of 666.79 (up 54% from intra-day low)

On the sector front the best performing sector has been Info Tech up almost 40% YTD.

Within the highest weighted Tech companies Apple (AAPL) stands out,  up almost 100% .  Google (GOOG) a more pedestrian 51%.  Microsoft and Intel 27% and 38% respectively.

Also a leading sector the Materials sector has enjoyed just over a 30% YTD return

Freeport McMoran (FCX) a copper and gold company stands 167% higher than the start of the year!

Heavy weight Monsanto (MON) is only better by 18%

Consumer Discretionary names as a sector are up by 23.6% from the start of the year.  This sector as it is driven by consumers has definite winners and losers.  McDonald’s Corporation (MCD) which was a relative bastion of safety in the last quarter of 2008 is actually down9.8% on the year.  This is likely because investors have rotated out of safety into higher beta higher risk names.

Ford (F) is back from the dead, taking the pole position of the top 15 members in this sector up 237%.  Remember this company did not take government money as Chrysler and General Motors (MTLQQ.PK) did.  Amazon (AMZN), up 61%, Target  (TGT) up 37% and Kohls (KSS) up 45%, are three retailers that compare favorably.

The consumer staples sector is higher by only 3% as investors have rotated out of traditional safety stocks.  Proctor Gamble (PG) is down 13% Wal Mart (WMT) is down almost 9% and Coca-Cola (KO) is up only 8%.

Lastly Financials are up 17% for the year.  This sector has had the biggest thrill ride at the lows it was down over 50%, from the lows it is up 143%!

Goldman Sachs (GS) is up 94% to lead the charge

American Experess (AXP) is higher by 84% as the consumer is still using the little green cards.

In the Banking subsector Wells Fargo (WFC) is still down on the year losing 7.3%

Citigroup (C) still has issues down 22%

Bank of America (BAC)  has recovered 27%

And J.P. Morgan Chase (JPM) is up a respectable 36% which is great by most measures, unfortunately they measure vs. Goldman Sachs typically.  So Jamie Dimon is probably disappointed.

The next move in the overall market is anyone’s guess.  The 10 day historical vol is calculated today at 10.79%.  The VIX is stubbornly staying near the 25% level, possibly indicating we are entering a more volatile trading environment into the last 4 months of the year.  The more dispersion between sectors, and between stocks in performance the more “normal” trading will be.

Remember the stock market is the ultimate forward looking indicator of future cash flows and expected growth for the economy and individual companies.

There is no better indicator out there.

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