Here we go…

Once every great blue moon the stars, the moon and the sun all line up in a perfectly beautiful celestial formation that leaves one feeling that all is right in the world. That is AMZN right now. The chart I posted yesterday is an investors dream come true. The Options Chain today is more than any one trader could ever ask for. Does this mean guaranteed success? No, the only guaranteed success in the stock market is that there is none.

When the pandemic hit people were stuck at home. Options Trading / Day Trading became a thing. Some lost money, but many did not. What that giant influx of new money in the markets did was generate Liquidity that is still much higher than pre pandemic. And sometimes that Liquidity became so large that day traders for the first time in market history were recognized as driving stock prices higher. That matters, and it matters to investors as well that invest in stocks when Options traders drive it higher. It then becomes a win / win for all. That is part of what we are seeing with AMZN right now. Don’t get me wrong Institutional buying is still the smart money, and it’s the big money that we want to follow. And institutions buy Options too, trust me they do. But right now AMZN options are being bought up massively by both.

This is what is called an “Options Chain” All of those thousands of different numbers you see represent different prices to buy at, different money one can make or lose are at each price, different ways the price will move with what percentage of buyers, it goes on and on and on and on. That’s part of why Options traders are rewarded so handsomely for their efforts, they have to put in effort.

See the yellow highlighted area? That is the 200 Strike, or the 200 price area. On the far left is the Calls, they are sitting at over 90K right now. ON the far right is the Puts, they barely have over 2K….. Kind of big spread huh? Might be one of the biggest in stock options history, I’m being serious. Not all of those Calls were bought ( expecting to go north ) some were sold when the price was much lower. What will occur now is those shorts that sold will have to “Cover” mean close those positions at a loss. That then drives the stock price itself higher. Or if it reverses south the shorts can breath for the time being.

This is a tricky spot to enter here, AMZN has had huge moves the past 2 days. Waiting for a pullback might be wise for common share holders and day traders alike. And set those Stops!! Options traders however can gain profits by protecting themselves with Verticals, I like Bull Call Spreads for this scenario. What one could do if they are highly bullish is buy the 200 strike and then sell the 205 strike, both for JUL 19, 2024. The sale of the 205 will offset the cost that you paid, it will also cap potential losses. More aggressive traders could consider buying the 200 strike and selling the 210, again for JUL 19. If you wanted a conservative approach you could consider maybe buying the 198 and then selling the 203. These are not made to be “set and forget” all investments / trades of any kind should be respected by not allowing wins turn into losses.

I’ve been waiting for AMZN to cross up above 200 for along time now, “Here we go”…….

Invest wisely, live charitably and be well

Brother Bill