Thoughts of a mechanical engineer turned programmer turned statistical investor. Here to save you from making mistakes I made at the beginning of my investing career.

AMZN earnings trade

With amzn trading at 2800, implied volatility at 46%, the vix at 30, and earnings this evening, it’s time to do a conservative earnings trade on them.

In the past year whenever AMZN neared the 2800 line it popped back up:

So a it’s possible to do a very (!) conservative ratio spread for a net 2350$ credit:

So it’s a 2600-2500$ out ratio spread, meaning than above 2500$ the position will expire worthless, netting me the initial credit of 2350$. If expires below 2600$, the put spread will be worth up to 10k$ (in addition to the 2350$ initial credit). And the break even is 2380$, so 18% below where they are today, which is 25% off their highs of 3700$.

Realistically, the outcome of this position will be “just” making 2350$, but there is a slight possibility of making more. And if Amzn tanks to 2000$, I consider that an amazing entry and will roll the put and buy call spreads for a great long term position.

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