Weekly Option Trades (July 7 - 11, 2025)
Option Trade on AMZN
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Disclaimer:
The information provided in this newsletter is for educational and informational purposes only and should not be construed as financial advice or as a recommendation for any specific security or trading strategy. My assumptions and observations were only valid at the time of trade execution and, for this reason, the trades described in the newsletter should not be mirrored. I share my trades and the rationale behind them exclusively for the purpose of teaching technical analysis and option trading techniques.
Trade Summary
I did the following option trade this week (detailed description below):
I opened a new cash-secured put on AMZN and received a cash premium of $200.
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Option Trades
Trade 1
On July 8, 2025, I sold to open (STO) 1 AMZN cash-secured put expiring on Aug 1, 2025 (DTE = 24 days), at a strike price of $200 for $2.00 per share, minus fees and commissions.
I received a premium of $200 (1 contract)
STO 1 AMZN 8/1/2025 $200 cash-secured put ($2.00/share)
Motivation:
Amazon is a quality company that I wouldn't mind owning (and sell covered calls), if assigned.
While markets traded mostly flat on this day, AMZN shares fell 1-2% as Bloomberg reported that early Prime Day spending was slow and about 14% lower than in 2024. This increased the put premiums and my target strike offered a reasonable risk/reward.
I considered the $205 strike for a higher premium but given that markets are overbought and likely due for a pullback, combined with tariff headline risk, I decided to go with the $200 strike for an increased margin of safety. The $195 strike did not offer a good risk/reward at this point.
Low Delta trade (when I executed the trade): 0.16 (~84% chance of expiring worthless)
If the put expires worthless, it would be a 1% return on investment in 24 days (1.25% normalized to 30 days or 15% annualized)
AMZN is expected to report earnings on Aug 7, 2025.
The put will expire prior to earnings.
Technical Support for the strike prices:
Based on the IV (implied volatility) at the time of my trade, the expected stock price range by the expiration date was $205 - $235 (+-$15), so the strike price of $200 was below the lower limit of this range.
The selected strike price coincided (approximately) with a previous price support level where AMZN found support in May 2025 and this level may serve as support again should the share price come down this much. See the annotation below.
The strike price was below the 20, 50, and 200-day moving averages, all of these could provide support (at least short-term), see annotation below.
The RSI indicator had already come down from overbought levels and was just below 60 as AMZN had been trading mostly sideways over the previous 7 trading days (see the RSI chart below).
It was, however, still pointing down and more downside was possible.
My goal is to close this trade before the expiration date and lock in profits early.
Should the strike price get challenged, I will likely first roll the trade out to a later expiration date and potentially the strike price down, if feasible and premiums are attractive.
Should the put get assigned, AMZN is a company that I would not mind owning to hold and sell covered calls.
Market Commentary
The S&P 500 Index traded sideways this week and the RSI indicator has started to cool down from the overbought levels (see S&P 500 chart and annotations below). So we saw a consolidation this week. Market Sentiment has remained at 'Extreme Greed' levels, although slightly lower compared to a week ago (see chart below).
A continuation of this sideways movement or a pullback from these levels remains likely in the near-term, and would be healthy for a potential new leg higher. But anything can happen, there still seems to be a lot of greed after the sell-off in April. Markets remain headline driven although less sensitive to tariff news. Next week, we get CPI and PPI data which could impact markets.
It remains more of a covered call market than a cash-secured put market. Having said this, I have found selective opportunities for cash-secured puts, either tickers that are not as overbought and overextended, or tickers that have a down days based on some negative news. Recent examples were AAPL, AMZN, and QCOM.
My approach remains the same:
Don't get too greedy when selecting strike prices for new cash-secured puts to chase premium (not too close to the money) as puts can move quickly in-the-money (ITM) during a pullback (unless you want to get assigned).
It's a good (better) time to sell covered calls with higher premiums and a possibly lower risk of getting called away as markets might cool down.
It could be worth considering selling bear (call) credit spreads (not meaning that my outlook is bearish but meaning that it's time for a short-term pullback).
Macro-economic update:
Data released this week:
The NFIB Small Business Optimism Index held steady in June, slipping slightly from 98.8 to 98.6. The Uncertainty Index remained historically elevated despite a 5-point drop to 89, well above the long-term average of 65.
Next week:
Consumer Price Index (CPI)
Producer Price Index (PPI)
Retail Sales
Consumer Sentiment
Housing Starts/Permits
Let me know any questions or comments.
Best regards,
Tim | HB7 Trading
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