Amazon (NASDAQ:AMZN) and the Coming Onslaught

It's a no-win situation for Amazon's shareholders, and if they refuse to acknowledge the gravity of the situation, at least protect yourself from a catastrophic loss. You can do so in several ways. A common method is through "portfolio insurance" or buying put options.

Cheap Russian Stocks Still Not Worth Risk, TIAA-CREF's Muromcew Says

DreamWorks Is The First Casualty of the Summer Box Office Slump

Buying the Dips and Selling the Rips Is the New Norm for This Market

The Amazon November $200 strike puts can be bought for about $1.15 each. For about the price of a dollar menu item plus tax, you can ensure that you will cap your potential downside, and anything under $200 doesn't result in further losses.

A January $190 put will cost you about two dollar menu items including tax. If you think Amazon trading $190 can't happen, keep in mind that at $190, Amazon will still be more expensive than Google, Wal-Mart, Target, or Apple on an earnings basis.

I use a proprietary blend of technical analysis, financial crowd behavior and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. You may want to use this article as a starting point of your own research with your financial planner.

At the time of publication the author had no holdings in any stock mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.