11/12/2013 AMZN

Amazon.com Inc.                                       NASDAQ: AMZN 354.38

“Morgan Stanley commented "We believe that growth needs to accelerate to justify recent performance, the absence of which could lead the group multiple to revert to the mean." The analyst warned investors that trading on strong TAM opportunity can face strong pullbacks” (Janowicz, 2013).

Reference

Janowicz. E. (November 11th,  2013) Morgan Stanley Lowered Internet Sector View, Warning on Possible Pullbacks. Benzinga.com. Retrieved  from http://www.benzinga.com

      The shares broke through the 355- 357 support area that had developed after the last earnings call. The economy isn't doing as well as the numbers indicate especially in light of some of the future guidance moving forward as was the case with IBM. The most recent lo’s on the shares is 341.88 as of last Thursday. The 345/330/315 Nov monthly put butterfly +1/-2/+1 is a cheap play going into this week’s expiration.

      If you can buy the put butterfly spread for 1.00 or better the risk is $100 with a potential reward of $1400 per spread which is optimally realized at the 330 strike by this coming Friday. The spread can still offer a great yield if the shares break below the break even price on the spread which comes in at 343.85 which is a drop of  roughly 9 points or so from where it is trading around.

      The 330 area represents a 10% drop from the recent hi’s after an astounding 220% increase in share prices from lo’s set in late December of 2011.  The breakdown in the markets last week showed how vulnerable the market is to a sell off as well as going into the end of the year expect to see some profit taking as investors seek to adjust their portfolios possibly adopting a more cautious tone until they see what the first quarter brings as well as if and when the Fed starts to tamper back form the Quantitative Easing which is expected to start as early as December but possibly may be delayed until March of next year.

       Yesterday’s Blog entry briefly touched on the subject of Butterfly spreads and can further be viewed at tradersexclusive.com

IV 28.40%  Nov Monthly (3)

Avg. Daily Volume 3,182,000

Open Int. (est.)     strike             NOV 13 Monthly (3)

310                                     3250

315                                     3400

320                                     3400

325                                     4460

330                                     3390

335                                     1850

340                                     3390

345                                     2360

350                                     3650

355                                     5533

360                                    3660

Reference

Janowicz. E. (November 2013) Morgan Stanley Lowered Internet Sector View, Warning on Possible Pullbacks. Benzinga.com. Retrieved  from http://www.benzinga.com

*Disclaimer: This is not a recommendation. All trading entails risk. Anyone employing any strategies and having limited knowledge of options trading should consult with a FINRA licensed professional.