Talk about an Amazon warrior. One trader is making a massive bet on the online retail giant, staking $50 million that the stock will rise significantly over the next two years.
On Tuesday, one firm bought 7,000 Amazon January 2017 300-strike calls for $72 per share. This trade, which cost more than $50 million in options premium, only makes money if Amazon shares rise above $372, which is only a bit below its all-time high of $408.
But the trader has a long time for the stock to make that move, as the options don't expire until the middle of January 2017.
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"I suspect they're replacing a long stock position with calls, and defining their risk to $72," commented Dan Nathan of RiskReversal.com on Thursday's "Fast Money."
But there may be more behind it than a pure stock replacement strategy. For whatever reason, a firm may be looking to increase the volatility of their returns while they bet on Amazon.
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"I don't think this is a great strategy for a lot of retail investors here, but I think it makes sense for those who are basically looking to add a little volatility in their portfolio in a name that has the potential to be very volatile," Nathan said.
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