Amazon.com Inc. (NASDAQ: AMZN) shares are trading higher this morning as online retailers are expecting a boost in sales on "Cyber Monday," when many shoppers begin making online purchases for the holidays. Initial retail results from Black Friday and this weekend were positive for retail stores, and Amazon is likely getting a bump from that as well. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AMZN.After hitting a one-year high of $101.09 in October, the stock has declined over the past month. AMZN opened this morning at $82.00. So far today the stock has hit a low of $82.13 and a high of $84.49. As of 11:50, AMZN is trading at $82.93, up $1.50 (1.8%). The chart for AMZN looks bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $62.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 2 months as long as AMZN is above $62.50 at January expiration. Amazon would have to fall by more than 24% before we would start to lose money. Learn more about this type of trade here.
AMZN hasn't been below $62.50 since May and has shown support around $78 recently. This trade could be risky if the retail market dives on a poor holiday season, but even if that happens, this stock could be buoyed by being the one of the leaders of online shopping.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AMZN.
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