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business newsOption Trading: Using Butterfly Positions in Amazon to Gain Profits
The broken-wing butterfly position is a great way to play potentially volatile earnings, especially if there are options set to expire in the next day or two.
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That worked fine on the notion of milking some premium out of the stock in what I felt would be relatively range-bound ahead of the upcoming earnings report; the effective cost basis of the $190/200 call spread is now down to a mere 30 cents.
But now with earnings set to be released on Tuesday, January 31, I’ve gone looking for positions that offer not only bigger protection but much bigger potential profits. I’ll be using butterfly spreads. I bring this up because I think these are very attractive standalone positions—meaning no need for prior involvement to establish these and hopefully profit. Here is an example:
- Buy to open 5 February $175 puts (AMZN120203P0017500) at $1.55 a contract
- Sold to open 15 February $165 puts (AMZN120203P0016500) at $0.50 a contract
- Bough to open 10 February $160 puts (AMZN120203P0016000) at $0.30 a contract
For more from Steve Smith, take a FREE 14-day trial to OptionSmith and get his specific options trades emailed to you along with exclusive access to his full portfolio. Learn more.
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