AMZN Trade Alert: Sell Weekly Put Options

by Michael Shulman | June 6, 2012 10:02 am

A few stocks have held up through the European financial crisis and Wall Street’s unfavorable reaction to recent jobs and economic data. Among them is one of the largest and fastest-growing retailers in the world: (NASDAQ:AMZN[1]).

Some investors don’t like owning Amazon shares — the company is growing on the order of 30% plus per year, but profits are anemic[2]. And the Street has a mixed view of the stock, while income investors hate that the company doesn’t pay a dividend.

But income investors can create an Amazon dividend by selling weekly put options.

Right now, AMZN shares are priced around $212. The stock, as I said, has held up well, and $205 has been a line in the sand during chaotic days. So, sell this week’s $205 puts. You should get around $1.08-$108 a contract. If they expire worthless, you net about half a percent. While that might not seem like a lot, multiply that by 50 weeks and that is 25% per year.

If this strategy appeals to you, also take a look at Research In Motion (NASDAQ:RIMM[3]). It’s a terrible company, and the stock has collapsed, as well it should.  You could have made a small fortune shorting RIMM with puts, but volatility has created some ridiculous premiums for puts for you to sell.

RIMM shares are just under $10, so you can get a half-percent return selling the June Week One $9 RIMM Puts that expire in a couple of days. This is a pure technical trade — you do no not want to be put the stock — but if you are a chart follower and 50 times a half-percent is to your liking, take a look at RIMM.

For purposes of disclosure, Michael Shulman owns shares.

Michael Shulman is editor of Options Income Blue Print[4]. Learn more about trading weekly options in this free short video[5].

  1. AMZN:
  2. the company is growing on the order of 30% plus per year, but profits are anemic:
  3. RIMM:
  4. Options Income Blue Print:
  5. free short video:

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