Amazon.com, Inc. (NASDAQ:AMZN) pulled back on Monday, as part of a broader tech-sell off. The e-commerce giant, which is reportedly entering the smart glasses industry, has not closed north of the $1,000 per-share level since July 28. However, if past is precedent, AMZN stock could be headed back above this key millennium mark in the final three months of 2017. Below, we’ll take a closer look at AMZN, and explain why now may be a good time to buy short-term calls on the FAANG stock.
Yesterday, Amazon stock fell as low as $932.89, but found a footing near its 160-day moving average — a trendline that served as a springboard for the shares last fall. And while the FAANG stock slipped into the red earlier today, it was last seen up 0.2% to trade at $942.19. Longer term, AMZN shares have tacked on 25.5% year-to-date.
There is reason to believe AMZN stock can resume its quest for higher highs through year’s end, too. Per data from Schaeffer’s Senior Quantitative Analyst Rocky White, Amazon has been one of the best stocks to own in the fourth quarter, when looking at all S&P 500 Index (SPX) components. In the past 10 years, the equity has averaged a fourth-quarter gain of 13.85%, with an 80% win rate.
In the options pits, some speculators may be betting that Amazon can reclaim the $1,000 level. Call open interest comes in at 345,455 contracts, in the high 95th annual percentile. The January 2018 1,200-strike call is home to peak open interest, with over 11,100 contracts outstanding. Those buying to open new positions here are betting that AMZN will rally north of $1,200 by the close on Friday, Jan. 19, when the options expire.
Furthermore, Amazon has consistently rewarded premium buyers over the past year, per its Schaeffer’s Volatility Scorecard (SVS) of 83. In other words, AMZN has tended to make outsized moves, relative to what the options market has priced in.
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