Bearish Amazon Options Sell at Discount Prices Before Earnings

(Bloomberg) -- Amazon.com Inc. options trading ahead of its fourth-quarter earnings report due after the bell Thursday implies an expectation for a smaller-than-average share move of 7.8 percent. And the cost of hedging against losses is the lowest it’s been in six months as shares hover near a record high.

The cost of put contracts relative to calls has been steadily falling as momentum behind the stock rally picked up this year. On Wednesday Amazon shares closed at a record $1,450.89 as the company has likely been a direct beneficiary of lower taxes and increased consumer spending after the first U.S. tax cut in 30 years.

Among the most widely held February options that expire Friday, there are almost 4 times the amount of calls held by investors than puts, indicating a continued bullish setup into the fourth-quarter earnings announcement, despite implied volatility nearing the 100th percentile.

--With assistance from Richard Richtmyer

To contact the reporter on this story: Gregory Calderone in New York at gcalderone7@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Richard Richtmyer, Brad Olesen

©2018 Bloomberg L.P.