{"id":54280,"date":"2020-07-29T10:30:00","date_gmt":"2020-07-29T14:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=54280"},"modified":"2022-11-21T09:45:58","modified_gmt":"2022-11-21T14:45:58","slug":"this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/","title":{"rendered":"This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart."},"content":{"rendered":"\n

Amazon<\/a>.com\u2019s earnings report is always one of the great events in the stock and options market. At about $3,000 a share, the e-retailer\u2019s securities always lure wealthy investors who like to try their luck at a high-stakes trade that can produce extraordinary rewards.<\/p>\n\n\n\n

Selling a put or buying a call before earnings can create substantial profits for anyone with the resources to finance the trade. Amazon (ticker: AMZN) is scheduled to report second-quarter earnings late Thursday. If the stock trades higher on the report, anyone who sold the cash-secured put stands to make a pretty penny, while the value of the call should surge.<\/p>\n\n\n\n

Of course, many investors will tremble at the thought of committing so much money to one trade, with each options contract covering 100 shares, but it happens every day. Investors with ample resources regularly trade options on mega-stocks with prices that exceed $1,000, including Amazon, Alphabet (GOOG), and others because the returns are so attractive if everything goes as planned.<\/p>\n\n\n\n

Should those trade sour, leaving the investor with the shares, few people care because the underlying fundamentals of the businesses are solid. Amazon, as everyone knows, is thriving during the Covid-19 pandemic because everyone loves having the world delivered to the safety and comfort of their own homes.<\/p>\n\n\n\n

If you can handle the specter of spending $300,000 for 100 shares of Amazon stock\u2013and don\u2019t snicker, many investors can\u2013here\u2019s a trade to consider.<\/p>\n\n\n\n

With Amazon\u2019s stock trading around $3,058, investors can sell the July $3,055 put that expires Friday for $124 and buy the July $3,065 call for $120. The risk-reversal\u2013that is, selling a put and buying a call with a higher strike price and same expiration\u2013positions investors to buy the stock at a lower price, while participating in any advances.<\/p>\n\n\n\n

In the options market, Amazon is priced as if the stock will move $253, up or down, in reaction to earnings. The expected movement is calculated by pricing the straddle, which is the cost to buy a call and put that matches the stock price. The straddle math is not terribly sophisticated, but everyone uses it as quick shorthand for stock moves.<\/p>\n\n\n\n

If the stock is at $3,318 at expiration, the call is worth $253, or technically $25,300 since every options contract covers 100 shares of stock. If the stock is below the put strike price at expiration, investors are obligated to buy the stock at the $3,055 strike price, or to cover the put. Some will criticize an approach that only makes $25,300, and that exposes an investor to the risk of buying a $300,000 stock, but many investors do just that to generate cash.<\/p>\n\n\n\n

The trade drips risk and reward, especially since many big technology stocks have reported good earnings reports and still declined because investors thought results were not as good as they wanted.<\/p>\n\n\n\n

Without doubt, do not even consider this trade if you lack the money to buy 100 shares of Amazon. But if you have the cash, and you have a taste for volatility and chaos, Amazon\u2019s earnings report is for you.<\/p>\n\n\n\n

—<\/p>\n\n\n\n

Originally Posted on July 29, 2020 – This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Amazon. com\u2019s earnings report is always one of the great events in the stock and options market.<\/p>\n","protected":false},"author":31,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6,19,8,9,22,26,3],"tags":[148],"contributors-categories":[13583],"class_list":{"0":"post-54280","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-north-america","7":"category-options","8":"category-region","9":"category-securities","10":"category-stocks","11":"category-text-articles","12":"category-traders-insight","13":"tag-amazon","14":"contributors-categories-barrons"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\nThis Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart.<\/title>\n<meta name=\"description\" content=\"Amazon. com\u2019s earnings report is always one of the great events in the stock and options market.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/54280\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart. | IBKR Campus US\" \/>\n<meta property=\"og:description\" content=\"Amazon. com\u2019s earnings report is always one of the great events in the stock and options market.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/\" \/>\n<meta property=\"og:site_name\" content=\"IBKR Campus US\" \/>\n<meta property=\"article:published_time\" content=\"2020-07-29T14:30:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-11-21T14:45:58+00:00\" \/>\n<meta name=\"author\" content=\"Steven M. Sears\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Steven M. Sears\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\n\t \"@context\": \"https:\\\/\\\/schema.org\",\n\t \"@graph\": [\n\t {\n\t \"@type\": \"NewsArticle\",\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/options\\\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\\\/#article\",\n\t \"isPartOf\": {\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/options\\\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\\\/\"\n\t },\n\t \"author\": {\n\t \"name\": \"Steven M. Sears\",\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#\\\/schema\\\/person\\\/0ea65db09e0994754c2de4316c083f30\"\n\t },\n\t \"headline\": \"This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart.\",\n\t \"datePublished\": \"2020-07-29T14:30:00+00:00\",\n\t \"dateModified\": \"2022-11-21T14:45:58+00:00\",\n\t \"mainEntityOfPage\": {\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/options\\\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\\\/\"\n\t },\n\t \"wordCount\": 547,\n\t \"publisher\": {\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#organization\"\n\t },\n\t \"keywords\": [\n\t \"Amazon\"\n\t ],\n\t \"articleSection\": [\n\t \"North America\",\n\t \"Options\",\n\t \"Region\",\n\t \"Securities\",\n\t \"Stocks\",\n\t \"Text Articles\",\n\t \"Traders' Insight\"\n\t ],\n\t \"inLanguage\": \"en-US\"\n\t },\n\t {\n\t \"@type\": \"WebPage\",\n\t \"@id\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/options\\\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\\\/\",\n\t \"url\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/options\\\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\\\/\",\n\t \"name\": \"This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart. | IBKR Campus US\",\n\t \"isPartOf\": {\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#website\"\n\t },\n\t \"datePublished\": \"2020-07-29T14:30:00+00:00\",\n\t \"dateModified\": \"2022-11-21T14:45:58+00:00\",\n\t \"description\": \"Amazon. com\u2019s earnings report is always one of the great events in the stock and options market.\",\n\t \"inLanguage\": \"en-US\",\n\t \"potentialAction\": [\n\t {\n\t \"@type\": \"ReadAction\",\n\t \"target\": [\n\t \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/options\\\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\\\/\"\n\t ]\n\t }\n\t ]\n\t },\n\t {\n\t \"@type\": \"WebSite\",\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#website\",\n\t \"url\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/\",\n\t \"name\": \"IBKR Campus US\",\n\t \"description\": \"Financial Education from Interactive Brokers\",\n\t \"publisher\": {\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#organization\"\n\t },\n\t \"potentialAction\": [\n\t {\n\t \"@type\": \"SearchAction\",\n\t \"target\": {\n\t \"@type\": \"EntryPoint\",\n\t \"urlTemplate\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/?s={search_term_string}\"\n\t },\n\t \"query-input\": {\n\t \"@type\": \"PropertyValueSpecification\",\n\t \"valueRequired\": true,\n\t \"valueName\": \"search_term_string\"\n\t }\n\t }\n\t ],\n\t \"inLanguage\": \"en-US\"\n\t },\n\t {\n\t \"@type\": \"Organization\",\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#organization\",\n\t \"name\": \"Interactive Brokers\",\n\t \"alternateName\": \"IBKR\",\n\t \"url\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/\",\n\t \"logo\": {\n\t \"@type\": \"ImageObject\",\n\t \"inLanguage\": \"en-US\",\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#\\\/schema\\\/logo\\\/image\\\/\",\n\t \"url\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2024\\\/05\\\/ibkr-campus-logo.jpg\",\n\t \"contentUrl\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2024\\\/05\\\/ibkr-campus-logo.jpg\",\n\t \"width\": 669,\n\t \"height\": 669,\n\t \"caption\": \"Interactive Brokers\"\n\t },\n\t \"image\": {\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#\\\/schema\\\/logo\\\/image\\\/\"\n\t },\n\t \"publishingPrinciples\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/about-ibkr-campus\\\/\",\n\t \"ethicsPolicy\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/cyber-security-notice\\\/\"\n\t },\n\t {\n\t \"@type\": \"Person\",\n\t \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#\\\/schema\\\/person\\\/0ea65db09e0994754c2de4316c083f30\",\n\t \"name\": \"Steven M. Sears\",\n\t \"description\": \"Steven M. Sears is the president, chief operating officer and co-founder of Options Solutions. The investment firm uses conservative options strategies to help clients enhance stock returns and reduce risk. Mr. Sears has deep experience in the options industry as an investor, exchange executive, and journalist.\",\n\t \"url\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/author\\\/steven-m-sears\\\/\"\n\t }\n\t ]\n\t}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart.","description":"Amazon. com\u2019s earnings report is always one of the great events in the stock and options market.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/54280\/","og_locale":"en_US","og_type":"article","og_title":"This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart. | IBKR Campus US","og_description":"Amazon. com\u2019s earnings report is always one of the great events in the stock and options market.","og_url":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/","og_site_name":"IBKR Campus US","article_published_time":"2020-07-29T14:30:00+00:00","article_modified_time":"2022-11-21T14:45:58+00:00","author":"Steven M. Sears","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Steven M. Sears","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"NewsArticle","@id":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/#article","isPartOf":{"@id":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/"},"author":{"name":"Steven M. Sears","@id":"https:\/\/ibkrcampus.com\/campus\/#\/schema\/person\/0ea65db09e0994754c2de4316c083f30"},"headline":"This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart.","datePublished":"2020-07-29T14:30:00+00:00","dateModified":"2022-11-21T14:45:58+00:00","mainEntityOfPage":{"@id":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/"},"wordCount":547,"publisher":{"@id":"https:\/\/ibkrcampus.com\/campus\/#organization"},"keywords":["Amazon"],"articleSection":["North America","Options","Region","Securities","Stocks","Text Articles","Traders' Insight"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/","url":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/","name":"This Big Bet on Amazon\u2019s Earnings Could Pay Off Handsomely. It\u2019s Not for the Faint of Heart. | IBKR Campus US","isPartOf":{"@id":"https:\/\/ibkrcampus.com\/campus\/#website"},"datePublished":"2020-07-29T14:30:00+00:00","dateModified":"2022-11-21T14:45:58+00:00","description":"Amazon. com\u2019s earnings report is always one of the great events in the stock and options market.","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/this-big-bet-on-amazons-earnings-could-pay-off-handsomely-its-not-for-the-faint-of-heart\/"]}]},{"@type":"WebSite","@id":"https:\/\/ibkrcampus.com\/campus\/#website","url":"https:\/\/ibkrcampus.com\/campus\/","name":"IBKR Campus US","description":"Financial Education from Interactive Brokers","publisher":{"@id":"https:\/\/ibkrcampus.com\/campus\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ibkrcampus.com\/campus\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ibkrcampus.com\/campus\/#organization","name":"Interactive Brokers","alternateName":"IBKR","url":"https:\/\/ibkrcampus.com\/campus\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ibkrcampus.com\/campus\/#\/schema\/logo\/image\/","url":"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/ibkr-campus-logo.jpg","contentUrl":"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/ibkr-campus-logo.jpg","width":669,"height":669,"caption":"Interactive Brokers"},"image":{"@id":"https:\/\/ibkrcampus.com\/campus\/#\/schema\/logo\/image\/"},"publishingPrinciples":"https:\/\/www.interactivebrokers.com\/campus\/about-ibkr-campus\/","ethicsPolicy":"https:\/\/www.interactivebrokers.com\/campus\/cyber-security-notice\/"},{"@type":"Person","@id":"https:\/\/ibkrcampus.com\/campus\/#\/schema\/person\/0ea65db09e0994754c2de4316c083f30","name":"Steven M. Sears","description":"Steven M. Sears is the president, chief operating officer and co-founder of Options Solutions. The investment firm uses conservative options strategies to help clients enhance stock returns and reduce risk. Mr. Sears has deep experience in the options industry as an investor, exchange executive, and journalist.","url":"https:\/\/www.interactivebrokers.com\/campus\/author\/steven-m-sears\/"}]}},"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts\/54280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/users\/31"}],"replies":[{"embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/comments?post=54280"}],"version-history":[{"count":0,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts\/54280\/revisions"}],"wp:attachment":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/media?parent=54280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/categories?post=54280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/tags?post=54280"},{"taxonomy":"contributors-categories","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/contributors-categories?post=54280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}