Want to make a Prime Trade? Check out this trade on Amazon ($AMZN) (December 06, 2019)
AMZN SAGE AMZN
Amazon ( NASDAQ: AMZN ); this stock has kind of under-performed lately. You can see it has been in a trading range forever but if you zoom in closer you can see what I am looking at here. Zigzag, zigzag. Now we are getting a move here above 1750.00, this is basically where it tested, and I am looking for a move at least up to 1800.00, that’s where the 200-day moving average is, which is only 3 percent, 3.5 percent. It’s not that big of a deal but it is if you buy calls, I will tell you that.
I will tell you this, I hardly ever option trades here in a Free Video but you are buying the 1750.00 calls expiring on December 20th, so this would be a total short-term trade. As I do this video on Friday, it’s 14*days until expiration. What we are really talking about is 2 more weeks of trading. You go all through next week and then the following week these puppies expire. The strike would be 1750.00 and right now those are trading with a $1.00 spread between the bid and the ask, 25.55 /26.55 and so that means your break-even would be 1775.00, 1776.00 depending on where you bought them. The stock would have to be up there, $25.00, $26.00, $27.00 above the 1750.00 strike price. Well, that’s only halfway, less than halfway from where the stock is likely to go. So you can make that trade and have a pretty good upside.
Now I could talk about doing a bull call spread, buying the 1750.00 and then selling, maybe, the 1800.00s, which would give you about $17.00 or $18.00 cost basis in this. But I am not going to do that; I am just talking about a straight long-call position here. Riding this up and making some pretty good money, assuming the stock keeps going. Your exit on this would be if the stock fell back below Friday’s intraday low of 1740.00, which would probably take away, it’s a pretty risky trade when you are talking about the kind of money you can lose on a $26.00 option. But if this stock falls back $10.00 below the strike you can bet that that option is going to be in a bad way.
What I am saying is, this is absolutely a risky trade. No question about it, I am not going to say, “Just buy a call and make a whole gang of money.” It doesn’t work that way and this would be a very risky trade, the stock is going to have to work. It is going to have to be moving up on Monday; it is going to have to break through the 50-day moving average. So this is not the type of thing that just before you grab your cup of coffee to go out and get into your nice electric car and then go sit on the 405 Freeway in LA and head to work. It’s not the kind of thing that you put on and then go do that. You kind of have to be watching the stock and make sure it gets off on the right foot, but this could be a pretty good trade for you.
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