Wednesday, January 27, 2010

AMZN Analysis for Earnings Play

Re-post: Volatility has not dropped 10% this morning. Don't know what I was thinking when I wrote that. I mean to say the below.

So I looked at the 2/1 unbalanced straddle and played with price movement and volatility. But nonetheless I did the analysis based on a 10% drop from where the current is, See the results below:

So it looks like my max risk would be about $700 bucks and my max profit based on an expected move of 11.6% would be about $1000 on 1 of these ratio spreads. Not sure I like the prospects of this trade. I will continue to look for other ways to play this going into earnings.

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