Three Earnings Plays After the Bell

Will this be the quarter Amazon's (AMZN) pitiful margins and lack of profit finally catch up with the stock? Not one person in an informal poll I've taken believes AMZN will be lower. Granted I've only heard back from 15 so far, but it is difficult to find a bear. I am willing to take a very small short based on the rolling-hill-like pattern, which gives me a $257.50 target. Therefore, I am playing the weekly puts and doing the following: buying 1x $265, shorting 3x $250, buying 1x $245 and 1x $240 puts for around $2.25. My maximum risk is $2.25 if AMZN finishes tomorrow above $265 or below $240.

Amazon (AMZN) Source: View Chart » View in New Window »

Bulls could use the same ratios on the call side and use the $285-$300-$305-$310 strikes for around $2.30 for the same type of trade. These are clearly range bound; however, I like the $250 to $300 range. In fact, one could play both trades for around $4.55, which only requires a 5% move to profitability, whereas the options market is pricing in around a 7%. Furthermore, the stock would have to move more than 11% for this combination. I will take a few of these combinations as well, but I will have twice as many put combos since I want to be bearish....172 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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