Amazon.com, Inc. (AMZN) 11/6/09 PriceWatch Alert Down To $113.86 Break Even

Posted: Friday, November 06, 2009 8:47 AM EDT

Amazon.com, Inc. (NasdaqNM: AMZN) closed yesterday at $120.61. So far the stock has hit a 52-week low of $34.68 and 52-week high of $125.68. Amazon stock has been showing support around 114.57 and resistance in the 123.97 range. Technical indicators for the stock are Bullish and S&P gives AMZN a neutral 3 STAR (out of 5) hold rating. AMZN appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 125 covered call (QZN AX) for a net debit in the $113.86 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 5.60% downside protection and a 9.78% assigned return rate for a 50.30% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the AMZN Jan '11 57.50 Call (VON AY) and selling the Jan '10 125 call (QZN AX) for a $59.15 debit. The trade has a 71 day life and would provide 3.28% downside protection and a 14.12% assigned return rate for a 73.00% annualized return rate (for comparison purposes only). Amazon does not pay dividends at this time. [FBB-Seven Summits Research]

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