Options Trading on Amazon to Take Advantage of a Year-end Rally

Black Friday has arrived, and Amazon is making significant strides to dominate the market. In exploring a cost-effective strategy to capitalize on the year-end resurgence in Amazon's shares, it's worth noting the company's bold move this year—acquiring broadcast rights to a Black Friday NFL game for nearly $100 million.

‍

In a groundbreaking development, the NFL's first-ever game on the busiest shopping day of the year will be exclusively available on Amazon's Prime Video platform rather than traditional TV. The matchup between the Miami Dolphins and the New York Jets is scheduled for 3 p.m. ET, marking a strategic investment for Amazon in live sports broadcasting.

‍

This $100 million expenditure comes on top of Amazon's existing commitment to pay $1 billion per year to broadcast 15 or 16 Thursday Night Football games annually until 2033. The e-commerce giant is evidently willing to pay a premium as it ventures into the highly competitive arena of live sports broadcasting.

‍

Amazon's foray into live broadcasting extends beyond the realm of American football, encompassing rights deals with the New York Yankees and the Seattle Storm. Moreover, the company streams Champions League matches to viewers in Italy and Germany, along with English Premier League matches in India.

‍

Following a significant dip in 2022, where Amazon's stock was nearly halved, investors who held firm have witnessed a remarkable rebound in the high-flying e-commerce and cloud giant, with shares experiencing a more than 75% year-to-date increase.

‍

This expansion into live broadcasting is not merely a strategic move for brand visibility but also a clever marketing ploy to drive further revenue growth and bolster Amazon Prime membership numbers. The company's revenue for the 12 months ending September 30, 2023, reached an impressive $554 billion, marking a 10% year-over-year increase. The upward trajectory in Amazon's annual revenue has been consistent, with 2022 seeing $513 billion (a 9% increase from 2021), and 2021 recording $469.8 billion (a 22% increase from 2020).

‍

Recognizing Amazon's broad business spectrum, encompassing e-commerce and cloud computing among multiple categories, is crucial. As of the beginning of 2023, Amazon Web Services (AWS) held a market share of around 33%, making it the largest cloud service globally—outpacing Microsoft Azure and Google Cloud combined at approximately 31%.

‍

Amid the bullish outlook for Amazon's continued dominance, a strategic approach is necessary to capitalize on its stock price at its 52-week high. Examining the chart, there appears to be a potential revisit to $170, a level with significant historical volume, especially considering Amazon's announcement of a 20-for-1 stock split in March 2022.

‍

To express a bullish view, a 1x2 ratio vertical call spread, commonly referred to as a front spread, seems suitable. This approach anticipates a continued rise in Amazon's price through year-end, while acknowledging the likelihood of the megacap juggernaut encountering resistance around $170. As of Friday, the stock was trading around $145, presenting an opportune entry point for this strategic options play.

‍