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 position adjustments!!

So the fed spoke and the nasdaq flew up 3%.

Honestly, with AMZN trading at multi-year lows, I’m actually a bit worried it will fly up from here and I won’t have the opportunity to make enough money on the way up and I will be kicking myself that I didn’t go more bullish, even though I will make a bunch of money even if I leave the positions as is and they expire worthless.

But lets adjust a bit to set us up to make a bit more money, without taking on any more margin requirements, by selling some more premium, with these 2 (executed) trades:

So lets explain:

I had a 2600-2500 BPS expiring in 16 days. If AMZN would expire above 2600, the whole position would expire worthless, which honestly isn’t horrible because it was an initial 2350$ credit (the original trade here), and is what I was expecting would happen when I opened the position before earnings.

But since AMZN dropped 400$ since, assuming I’m confident AMZN will recover from here, I can take advantage of the 400$ drop and roll the short put to a 2560$ June put, for net 81$ (so 8100$), although I’m also going up 60$ in strike.

And I already own 2x June 2600-2560 BPS on AMZN (which used to be a put ratio but I already rolled the 2560$ short puts out to June 2024 2000$ puts for a 3k$ credit). So to guard against AMZN staying down for another month, I can roll the May 2600-2500$ BPS out a month to join the 2x June BPS I already own, and because I’m making only a 40$ spread instead of a 100$ spread, I can get a net 3000$ credit for that roll.

So what I just did is pocket 11,100$ (!!!!), and I’m now betting AMZN will be above 2560$ in 1.5 months (instead of above 2500$ in 2 weeks). And if it isn’t above 2560$ in June expiration, my 3x June BPS will be worth 12k$ (now $6.5k so 5.5k$ to gain from here). And if AMZN flies up above 2600$, at least I pocketed another 11k$ on the “earnings trade”.

So since my AMZN earnings trade last week, these were my adjustments:

So other than the 2350$ initial credit on the earnings trade, I have now pocketed 2350+1700+3k+8.1k+3.4k = $18,500 (!!!).

So if AMZN expires June above 2560$, the June positions will all expire worthless (currently -9,000, so I’ll gain another 9k from here for a total of 27k$ for the earnings play), and if AMZN is below 2560$ on June expiration I’ll pocket 12k$ from the 3x BPS and need to adjust the extra short $2560 put.

And honestly its crazy that suddenly all of the seekingalpha articles look like this:

As if people were waiting for a >30% drop in AMZN from its ATH, and are now waiting for another (!!!) 25% drop from here before they start to invest… Like literally the probability of that outcome is so low, in almost all outcomes you will just be sitting out on the next 500$ AMZN rally. And I’m not saying AMZN will go back to 3700$ or that it should, but it seems highly unlikely that it will go down another 25% from here to 2000$.

And if you don’t buy AMZN when its in a >30% correction, when will you buy it? When it goes back up 10% from here? Why? Why not buy low sell high? And thats the beauty of short puts and especially put ratio spreads. That you can get decent profits even if the stock goes up and your position expires worthless, but if the stock goes down, it gives you the opportunity to make really MASSIVE profits.

And honestly, if AMZN goes down to 2000$ in the next month, I will be very (!!!!) happy to take my 12k$ from the 3x June BPS, and roll the 2560$ down and out, and I would probably even double down from where I am now to increase my potential gains from AMZN bouncing back up a couple hundred $$$ from 2000$, as AMZN at 2000$ is literally where it was 2 years ago.

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