News broke yesterday that Amazon (AMZN) is planning on expanding the company’s five-year-long experiment in delivering groceries in the Seattle area to twenty cities. This could be a rumor – but rumor or not, the word has prompted some interesting activity among traders. And also tells you something about the company – P/E be damned, they are expanding. And that means traders who want to see performance growth every two to four hours continue to fight investors in Amazon who have a somewhat longer time frame. Since it went public, the investors have won by owning Amazon.
Given the news and the general declines in the market, AMZN has held up well and there is an opportunity to generate some quick cash using the approach I use in my service Options Income Blueprint: Sell some puts.
As I write this AMZN is about $266. If you are willing to own the stock or roll the puts should the stock move the wrong way, you can sell the June Week One $265 puts and if they expire worthless you get slightly less than a one percent return in two days. Small beer? That is an annualized return of almost fifty percent. If you want to stay away from a strike that close, and sell the $260, your return will still be very good, about 19% on an annualized basis. The other way to play the announcement is to sell some puts against Whole Foods (WFM). The stock took a hit on AMZN’s announcement. The stock is around $51, if you sell this week’s $50 put, you gate an annualized return of roughly 15%.
For purposes of disclosure, I buy almost everything I can on Amazon. I even published my latest book, Made in America, via Amazon and I shop more at Whole Foods than any other grocer or food emporium.
See ya, time to eat.
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