Amazon.com, Inc. (AMZN) 11/12/09 PriceWatch Alert Could Hit 52.24% Return

Posted: Thursday, November 12, 2009 8:15 AM EDT
By: Market Intelligence Center Staff

Amazon.com, Inc. (NasdaqNM: AMZN) closed yesterday at $129.91. So far the stock has hit a 52-week low of $34.68 and 52-week high of $131.31. Amazon stock has been showing support around 126.87 and resistance in the 132.83 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 '10 135 covered call (QZN AG) for a net debit in the $123.51 area. That is also the break even stock price for this trade. This covered call has a 65 day duration, provides 4.93% downside protection and a 9.30% assigned return rate for a 52.24% 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 '10 135 call (QZN AG) for a $67.85 debit. The trade has a 65 day life and would provide 3.51% downside protection and a 14.22% assigned return rate for an 80.00% annualized return rate (for comparison purposes only). Amazon does not pay dividends at this time. [THA-Seven Summits Research]