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Buy Amazon Calls on the Dip

A long call strategy could pay off as the stock rallies


Dan Passarelli is an author and the founder of Market Taker Mentoring LLC, the home of personalized, one-on-one options education.

One of this week’s Market Taker Edge trades is in (NASDAQ: AMZN). Amazon is a strong player in all things Net related. They’ve got their hands in lots of different things. Technically, AMZN is offering options trading investors a potential opportunity to scoop up some shares at a discount. The opportunity is to get bullish on AMZN shares on the dip.

A great way to play this is a rather straightforward, quick and dirty way: Buy the AMZN March 175 Calls expiring on March 19. They were trading around $2.30 as the market sold off this morning. Traders buying these calls have the benefit of low cost and high gamma, compared to longer-term options. For share appreciation over the next week or two, these calls give traders the most bang for their buck.

Traders should keep in mind that these short-term, near the moneys also have high theta—a detriment to traders. So, the sooner AMZN rises, the better.

Dan Passarelli of writes the Market Taker Edge options newsletter. Dan has more than 17 years’ experience in the options industry as a market maker, Options Institute instructor and author of “Trading Option Greeks.”

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