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3 Black Friday Blue-Chip Options Trades

Holiday opportunities can be found in AMZN, WMT and BBY

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Amazon (AMZN)

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Amazon (AMZN) is riding the e-commerce wave.

According to data from the Commerce Department, e-commerce made up 5.9% of all retail sales in Q3, up from 5.2% a year ago and 1.8% in 2003. Additionally, ComScore is forecasting a 12%-15% increase in U.S. online sales for the current holiday season.

Combine this with Amazon’s recent deal with the U.S. Postal Service for Sunday deliveries for Prime members, and we have the makings of another impressive Black Friday/Cyber Monday for Amazon.

On the sentiment front, analysts are clearly jazzed about Amazon’s prospects, with the stock attracting a whopping 31 “buys,” 11 “holds” and no “sell” ratings. Options traders, meanwhile, are holding back, with AMZN’s November/December put/call open interest ratio arriving at 1 — indicating that an equal number of calls and puts are open in the November and December series of options.

This lack of enthusiasm from the options crowd could be general worry about the holiday shopping season, or it could be signs of investor profit taking following the stock’s recent run higher. From a technical perspective, AMZN is on the verge of overbought territory, but support looks firm in the $370-$375 region.

With AMZN recently breaking out above 375, we could see a brief lull before the stock resumes its uptrend — one powered by Black Friday sales figures. Traders looking to get in on this continued upside might want to consider a Jan 375/400 bull call spread.

At the close of trading on Monday this spread was asked at $9.85, or $985 per pair of contracts. Breakeven lies at $384.85, while a maximum profit of $15.15 is possible if AMZN closes at or above $400 when January options expire.

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