Back on February 24th I wrote about AMZN while it was trading at $178 and noted the stock was trading at support.  It has yet to break that support and has gone to $210 since then.   This was the chart I posted back in late February.  The circle on the chart above shows the approximate date I created the chart below:

Today the stock closed at $194 and tomorrow after the bell AMZN will report their earnings.  With a 2% gain today the calls were up roughly 50% on many of the strikes.  There is a large premium heading into tomorrow nights earnings release.  So what type of option trades can we try and make for the big earnings report tomorrow?  I have a tough time buying when premiums are so high.

If you plan on trading AMZN options tomorrow and holding through earnings you will need at least a 4% move from AMZN to make a profit.  Considering AMZN has moved 10% or better many times in the past, a 4%  or more could be in the cards tomorrow after the close.

I am going to treat AMZN much like I treated AAPL before earnings.  I wasn’t going to touch AAPL, but AAPL continued to fall and I saw a great opportunity to buy calls.  I picked up the $605 strike for $3.75.  I sold that position this morning at the open when the calls were being bought for over $15.  My fill was exactly $15 from $3.75.

I am hoping for a dip in AMZN stock, I will then look for the calls.  If we get a nice rip I will look for the puts.  It is a very simple strategy, and it pays off more often than not.  If AMZN stays flat, premiums will rise and I will sit on my hands and wait for the Thursday open. I will post my move in the chat room.

Volume on AMZN options were slightly skewed towards the calls today.  I think AMZN will burst over $200 on earnings, but it will be tough to trade if I can’t get cheaper $205 calls.  My hope is AMZN gets dumped tomorrow much like AAPL did.   If I don’t get a price I like, then I won’t be playing AMZN.