Earnings Beat – AMZN Trade

 

Market Context

Good day Insiders,

Amazon is set to report earnings post the close today and implied volatility levels are sitting at a ripe 71%, at the time of this update AMZN is trading at $1914 and as a result of implied volatility we have an estimated move of +/-$75. This has us in a range between $1840 and $1990. Using this range and taking advantage of volatility, let us construct our trade a bit differently.

The Trade

We are going to sell a put spread, buy a call spread and in an attempt to take advantage of volatility buy an unbalanced condor that will control our margin. Note the tail on the condor is 10 vs the conventional double of the long 3. 

 

Risk & Reward

Our trade will use $7,600 in margin and our breakevens are 1860 on the downside and 1970 on the upside. We have downside protection all the way down to 1803 and in the event AMZN does not move, we have a total risk of $600.