EOT Trade Alert February 13, 2014

| February 13, 2014

February 13, 2014

Trade Alert:

Buy AMZN April 2014 $365.00 Mini Call Option at $12.25 or better

Company Background:

Amazon.com (AMZN) is the largest e-commerce site on the planet.

Short-Term Catalyst:

AMZN shares have been a growth investor’s dream.

The company has grown into the largest e-commerce site on the planet.  And the share price has soared from $40 in 2009 to a recent high of $408.

However, their latest earnings report disappointed investors.  Analysts expected revenue to increase 22.5% year-over-year to $26.1 billion.  But revenue came in at $25.6 billion.

The shortcoming was due to weaker than expected sales growth in their international segment.  North American sales jumped 26%, but international sales only grew 13%.

What’s more, earnings per share fell short of estimates as well.  Investors were expecting earnings per share of 67 cents but came in at 51 cents.

Here’s the thing…

The disappointing numbers still represent some serious growth.  Year-over-year revenue grew at 20% and earnings per share jumped 142%.  That’s some serious growth any way you slice it.

Right now the stock is 13% below the 52-week high.  Looking back over AMZN’s chart during the last few years, a correction of this magnitude has been a great buying opportunity.  The stock has recovered the losses and made a new high within a matter of a few months.

Let’s use the recent drop in price to grab call options on AMZN now.

Due to AMZN’s high stock price, the standard options are very pricey.  However, the new mini options solve this problem.  Each mini option controls only 10 shares of stock as opposed to 100 with standard options.

In other words, the cost of a mini option is calculated by multiplying the cost of a mini option by 10 instead of 100 for standard options.  So the cost of each AMZN April 2014 $365.00 Mini Call Option at $12.25 is $122.50.

Trade Details:

Underlying Stock Symbol: AMZN
Current Bid-Ask Price: $11.60 – $12.05
Option “Buy Up To” Price: $12.25
Break-Even On Stock At Expiration: $377.25
Maximum Risk Per Contract: $122.50


Exit Strategy:

AMZN is trading at $356.02 per share.  Resistance levels will be at $380 and again at $400.  Remember, we want this stock to move higher.  Support levels will be at $340 and $320.  Conservative investors should look to exit at the first support or resistance level.  Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

About the Author ()

Comments are closed.