Is Amazon a buy?
As of June 17, 2022, Amazon is currently trading around $105.
I know that a lot of tech stocks, and other stocks, have pulled back by about 50 to 70 percent.
In this situation, especially because volatility is still extremely high, and you're able to collect significant premium by selling options, I believe that the best thing to do would be to sell a put option with a strike price of about $100 and an expiration of about three to four weeks out.
You can sell the July monthly expiration put option with a strike price of $100 and you can collect about $220 for every single contract that you sell.
What this means is that you will collect $220 for agreeing to buy Amazon at a price of $100.
You'll keep this $220 dollars as long as Amazon stays above $100 on the expiration date of the third Friday in July 2022.
Since Amazon was recently trading above $160 just six months ago I definitely believe that one of the best things that you can do would be to take ownership of Amazon stock at around $100 dollars.
By taking ownership of the stock you'll be able to participate in the upside capital appreciation of the stock however I do realize that taking ownership of 100 shares of Amazon stock is not very capital inefficient so what you can do is you can use options to structure the transaction so that it's synthetically long what you'll do is you go about six months out you can sell an at the money put and then buy an at the money call option.
By doing this you can use the premium that you collected by selling the at the money put option to finance the majority of the premium that you'll pay for the at the money call option.
Generally, as said earlier, you'll go about three to six months out that way you'll give yourself time to be right, but during situations like this where many stocks have pulled back anywhere from 30 to 60 percent I definitely think it's worthwhile to go long stock whether it's synthetically or actually long the shares.
By doing this you're able to participate in the upside and you can vastly improve and increase your returns.
Is Amazon a Buy?
So, is Amazon a buy?
It depends on whether the market continues to go down.
After falling ~40% off its 52 week high, it seems that Amazon may be a good stock to go long, or to sell options on.
Is Amazon a good investment for 2022?
Long-run, it probably is.
But, make sure not to use too much leverage or else you may be forced to close the position at an inopportune time.
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Buy Amazon (Conclusion)
Amazon seems like a good value right now as it's trading well off its recent highs.
Although, structuring the transaction using options is more capital efficient and will likely provide larger gains.