Amazon - How to Trade Unusual Options Activity

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([Continue reading]() --------------------------------------------------------------- Keith Fitz-Gerald's PREMIUM SERVICES Research [Another Recommendation That's Beating the Markets Two to One]( Current Open Positions: 64 Avg. 2017 Returns: 55.51% Trading [Capture 229% Gains Before Lunch]( Current Open Positions: 51 Avg. 2017 Returns: 45.32% IN THE MEDIA [Is the Rally Over? Watch the full video here.]([Amazon - How to Trade Unusual Options Activity]( Dear Total Wealth Reader, If you're like millions of investors, you'd give anything to have a crystal ball, especially when it comes to a stock like Amazon.com Inc. ([NasdaqGS:AMZN](). Obviously, I can't give you one... but I can come close. Today we're going to talk about two things: - An important bit of information most investors overlook; and, - How to turn what you learn in to a high probability trade. Amazon will report earnings Thursday after the bell and options activity is implying a monster move of 7%-9% on the numbers. Normal earnings volatility, to put this in context, is around 5%. In plain English, that means the stock could jump by $129.40 to $1,567.22 per share versus a more "normal" $1,437.82 per share (what it closed at on Tuesday). That means the stock would be within spitting distance of a $750 billion valuation. To be fair, options volatility works in both directions. The move I'm talking about could take prices lower just as easily as it could take prices higher. But, I don't think that'll happen. [SPECIAL REPORT] [Five Double-Digit Dividend Plays to Secure Your "Second Salary"]( I believe that the direction will be higher based on Amazon's trajectory and its history - specifically, the company's last earnings report on October 26, 2017 which caused a 13.21% move higher in a single day. There are any number of reasons: - Revenues are growing at a compound annual growth rate of 23.12% over the last 5 years; or, - The fact that cash and equivalents are growing at a compound annual growth rate of 22.13% over the same period. - The company will make a number of revenue enhancing moves within the next 12-24 months including entries into both health care and banking that I first told you were likely a year ago. Editor's Note: Shortly after Keith submitted this article, Amazon did, in fact, announce a joint undertaking with JPMorgan, Chase & Co. ([NYSE:JPM]() and Berkshire Hathaway Inc. ([NYSE:BRK.A]() aimed specifically at improving health care services and lowering costs. That means it's time to prepare for the second part of Keith's prediction in this area - that conventional health care insurance companies get slammed as the "Amazon-effect" rolls into personalized care. He'll have more in Friday's column. We'll come back to that in a moment. First, I want to explain why unusual options activity is important and what to look for. That way you can use today's Total Wealth as a springboard for more "crystal ball" trades on any stock you fancy. --------------------------------------------------------------- [Are you waiting for your next life-changing opportunity? Here it is...]( This is the boldest research initiative that we've undertaken here at Money Morning. And a small group of people has already had the chance to take advantage and earn unbelievable rewards. The door for you to join them is open... but before you make your move, [watch this now](. --------------------------------------------------------------- Most investors believe options are like spicy sauce on your taco... a means of introducing a little more "zip." However, they're missing something critical. Options are also like a "poker tell" in today's markets. As such, they're frequently a harbinger of big market moves ahead in the underlying securities. What I like about them is there's no guesswork. Unlike stock which exists in perpetuity as long as the company that's issued it does, options come into existence only when traders make a specific choice - that a company's stock is going to move higher or lower. Like an involuntary twitch or a hand to the side of the head at the poker table, unusual options activity tells you that there's big money on the move. Insiders, hedge funds, institutions, and corporate raiders all use 'em to pre-position their money ahead of major moves that can result in huge profits. In some cases - like this one - that's earnings but it could also be everything from a change in business strategy, to new contracts, to impending news that will have a material impact on a company's stock price. Mergers and acquisitions like those we talked about [on Wednesday last week]( are also good examples. Carl Icahn, for instance, used options to establish monster positions in both Herbalife Ltd. ([NYSE:HLF]() and Netflix Inc. ([NasdaqGS:NFLX](). Bill Ackman used options to build a large position in Target Corp. ([NYSE:TGT](). Even Warren Buffet used warrants, a form of option, to take a $5 billion position in Goldman Sachs Group Inc. ([NYSE:GS]() during the depths of the financial crisis . Options are one of the few areas in today's financial markets where you can play on exactly the same terms as the "big money." For example, you can control a 100 shares of an ultra-expensive stock like Amazon for as little as $55.55 a share. Imagine the kind of returns that could create versus just a single share at $1,437.82, which is where Amazon closed on Tuesday. The other thing to think about is that options can actually reduce your risk, especially in a situation like this one. Just like the insurance on your house or your car, options can boost your profits for a fraction of the cost while minimizing the amount of money you have at risk - something straight stock trades don't offer. --------------------------------------------------------------- [Capture a Life-Changing Fortune from the Most Profitable Event of 2018]( An event of historic proportions is unfolding in California's marijuana markets, and if you're not prepared to [take advantage right now](, you can say goodbye to your chance to turn a small stake into a life-changing payday. California has completely legalized cannabis - promising to spark a $20.2 BILLION industry in the Golden State alone. The windfalls to be made here are historic... but only if you learn how to position yourself to profit. Money Morning just conducted an interview with one of America's leading pot stock experts, who's narrowed down the search to [three tiny California companies]( positioned for a massive upward jolt. If you're serious about learning how to make millions from the marijuana markets, it's crucial you [go here now](. --------------------------------------------------------------- With this in mind, let's shift gears and talk about how you find unusual options activity and what very specific tells you'll want to look for. That way you can learn how to do this on any stock even though we're talking about Amazon at the moment. The first thing you want to do when screening for unusual options activity is look for unusual volume- meaning how many options are being traded versus the average daily volume. Trading volume of 1,000 call options on Facebook Inc. ([NasdaqGS:FB]() or Apple Inc. ([NasdaqGS:AAPL]() isn't unusual, but trading that amount on a much smaller stock like Teva Pharmaceutical Industries Ltd. ([NYSE:TEVA]() or Xunlei Ltd. ([NasdaqGS:XNET]() would be. The key here is anything three to five times normal transaction volume is suspicious. Source: barchart.com, Fitz-Gerald Research Publications, LLC I also like to look for huge jumps in open interest. "Open interest" is the number of options contracts "open" - meaning that need to be closed and taken off the books. What you're looking for is newly established positions and you can find those by identifying instances where total volume is greater than open interest. And, finally, you want to take a look at implied volatility. That's a statistical measure reflecting the price of options. Big orders that cause big jumps in statistical volatility are key because that tells you traders are willing to pay more money to get in the trade than they would be in a situation where the volatility didn't jump - even though the order causing it was larger than normal. So now what? You've got all the information you need to trade Amazon - unusual volume, a corresponding jump in open interest, and increased volatility - ahead of earnings. If you own the stock... I suggest tightening up your trailing stops. That way you can benefit from a quick upside move that allows you to maximize profits while at the same time protecting against downside risk. [CRITICAL] [Is the Rally Over?]( If you're options savvy... consider buying the AMZN March 16, 2018 $1,450 Call ([AMZN180316C01450000]() options. That way you line up your money with large traders and institutions who appear to be thinking the same thing. - If you're a bit more skeptical and want an even more limited risk trade, consider selling an AMZN March 16, 2018 1480/1470 Put spread. It's trading at $4.83 as I write this and a move of only $24.72 (or just 1.69%) by expiration would allow a savvy investor to keep 100% of the premium in a move that's also extremely limited risk. As always, there are two caveats: - Options are speculative trades which means you want to risk ONLY money you can afford to lose; and, - Trades like this are intended to compliment your core investments, not replace 'em. --------------------------------------------------------------- [Top Secret Technology Set to Stop Chinese Aggression Dead in Its Tracks]( Appalling [satellite footage]( has confirmed one of the Pentagon's worst fears... a situation so dire, it could be the driving force behind our next World War. Hostilities in the South China Sea are growing grimmer by the day, and the Chinese have been developing a [deadly new superweapon]( they think gives them the upper hand. Meanwhile, the Pentagon has quietly been funneling billions into a new generation of defense contractors... one of them is a tiny company with a top-secret technology straight from the pages of a science fiction novel. [You're not going to believe this](... --------------------------------------------------------------- Speaking of which, I've recommended AMZN stock in our sister publication, The Money Map Report and it's already returned more than 83.70% which means it's closing in on another 100% winner that you can convert to a ["Free Trade"]( using another of my favorite Total Wealth Tactics. It's not too late to get in on the action either - just [click here](. If you aren't familiar with the "Free Trade," now's a good time to study up. Rising interest rates are going to create some terrific trading opportunities to lock in profits and rotate the money you free up into even more windfall gains ahead. I'll be with you every step of the way. Best regards for great investing (and trading), Keith Fitz-Gerald Chief Investment Strategist --------------------------------------------------------------- More from Keith... [The Best Way to Play $500 Billion in Big Money Movements Right Now]( Stocks cruised to yet another set of record highs this week on strong earnings from Caterpillar Inc. ([NYSE:CAT]() and 3M Co. ([NYSE:MMM](), in particular. Materials and information technology were key with better than expected earnings, strong results, and even stronger guidance. Growth will continue to be faster and stronger than many people expect - and there's one sector attracting more money, faster than all the rest. And, as always, I've got a recommendation I think you're going to find very exciting. [[Full Story](] Five Bold Legal Cannabis Predictions You Can Cash In on in 2018 Legal Marijuana Specialist Michael A. Robinson has spent the past year, hitting the trail, digging up the biggest and best info and data on the cannabis business. Along the way, he's learned a number of valuable lessons. And he's used it all to make investors a mint through investing in the right penny pot stocks. Now he's used those same lessons to bring you his five biggest legal cannabis predictions for 2018. All five are catalysts that will really drive the marijuana market upward in the next year. To get his latest report - and to sign up for all the other recommendations and strategies Michael shares in his free, twice-weekly Strategic Tech Investor - [click here](. [Dow 60k... Still On Track (Even Though Most People Still Don't Believe It)]( Last June I made an observation that the Dow Jones Industrial Average would hit 60,000 at a time when it was trading at only 21,171.57 - a seemingly incomprehensible 183.4% increase. Yet, here we are. The Dow closed at 26,392.79 last Thursday, calling for a new record high in a string of an unprecedented 10 records recorded in 2018 already... and 60,000 still seems incomprehensible to most investors. Is it? Not if you do the math. [[Here's what you need to know](] --------------------------------------------------------------- You Also May Have Missed... [World Governments Are Rushing to Transition to This Remarkable Energy Source]( [Big Tax Bills Have Millions Turning to This "Secret Investment"]( [FCC approval could send this tiny stock soaring]( [A $602 value, yours risk-free to start]( --------------------------------------------------------------- Share [Facebook]( [Twitter]( [More...]( mailto:?subject=Keith%20Fitz-Gerald's%20Total%20Wealth%20Research&body=Check%20out%20http%3A%2F%2Fwww.totalwealthresearch.com%2F --------------------------------------------------------------- You are receiving this e-mail at, {EMAIL}, as a part of your free subscription to Total Wealth. 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