by John Kmiecik | July 1, 2013 9:19 am
It’s said that more and more shopping is being done online — especially around the holidays. And heck, most retail traders to their buying and selling online, too.
Well, here’s a trade idea that pairs online shopping with trading for a potentially profitable idea.
The trade: Sell the July 265/270 Put Credit Spread (selling the July 270 put and buying the July 265 put) for a $1.05 credit or better.
The strategy: The maximum potential profit for this trade is $1.05 if AMZN is trading above $270 at July 20 expiration. The maximum loss is $3.95 (5 – 1.05) if AMZN is trading below $265 at expiration. Breakeven is $268.95 at expiration based on a credit of $1.05.
The rationale: Amazon.com is always trying to improve itself in the face of tough competition and economic times. The retailer already has one of the largest online selections of goods and services, and it recently opened a 3D printing section and partnered with Viacom (VIAB) to expand its video offerings. Its net sales grew 22% in the first quarter this year compared to last year, and solid growth is expected in the future as well.
Click to Enlarge Looking at the chart, AMZN has formed many areas of support and resistance from prior pivot levels. Currently, the stock looks to be moving higher as it recently set a higher pivot high and low. The last pivot low was formed right around $270 — where the strike is sold for the credit spread — and should act as support, doing its best to keep the stock from moving lower.
If AMZN breaks through resistance, which is just above where it’s currently trading, things might be looking good.
As of this writing, John Kmiecik did not hold a position in any of the aforementioned securities.
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