Amazon: The Week That Was

by JDH on April 28, 2018

This week I decided to play AMZN – Inc.  Here’s how it went:

On Monday April 23 I bought 100 shares for $1,529, then another 100 for $1,538.75, and then I averaged down and bought a final 100 shares for $1,511.  Average cost $1,526.25.

By Tuesday it was down to $1,463.50, so I sold 100 shares to reduce my risk.

On Thursday Amazon was trending higher and was trading at around $1,500, so I did a covered write for 2 calls, strike price $1,570, expiring the next day.  I got $14.80 for them, a huge premium for options $70 out of the money with one day to maturity.

Thursday night Amazon announced blow out good earnings, and it opened Friday at $1,638.

Oops.  I guess I shouldn’t have sold a hundred shares on Tuesday, and I shouldn’t have covered on Thursday.

By the afternoon on Friday Amazon was down to around $1,570, so I bought the options back for $7, and I then sold my shares for $1,576.  (It’s a volatile stock).

The scorecard:

Bought 300 shares for $1,526.50, sold 300 shares for an average price of $1,538.50, for a profit of $12 per share.

Did the covered write for $14.80, covered it for $7, for a profit of $7.80 on two contracts.

That’s a total profit of about $5,000.

Given the value of 300 shares of Amazon, that’s pitiful.

I was correct; Amazon was going up.  I made two obvious mistakes: I sold 100 shares too early, and I didn’t cover immediately.

When I bought the shares on Monday, I could have immediately done the covered write and pocketed a huge premium, and then closed out the covered write after the collapse on Tuesday.

Oh well, live and learn, but I don’t think I’ll be playing Amazon again.

Or maybe I will.

Tune in next week to find out what crazy mistakes I make.

Thanks for reading.  See you next week.