AMZN Calendar to take Advantage of Elevated Implied Volatility

Amazon (AMZN) will report earnings today after the market close. The Jan options expire tomorrow and has tremendously high implied volatility (IV).

If you are bullish on AMZN shares, but want to put on a trade that would take advantage of the high implied volatility (and may position yourself for a nice rally into next week), then you can do the following trade.

The trade: Jan weekly/Feb weekly Calendar spread. Sell the 200-strike CALL expiring tomorrow and buy the 200-strike CALL expiring next Friday. The trade is most profitable if AMZN trades at 200.00 by 4:00 PM tomorrow with 1 to 9.5 risk/reward.

What if you are not sure about the direction but want to take advantage of high IV? Please consider the following:

You could do a similar trade on both the CALL and PUT sides with a risk/reward 1 to 5.65! You make the most money if AMZN trades at either 200 or 160 by 4:00 PM tomorrow.

DevTrade (Full Disclosure: Long Jan weekly/Feb weekly Calendar spreads (Call and Put) at the time of writing)