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Options Action

Options trader bets Amazon will be the next tech titan to tumble on earnings

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Options Action: More pain for Amazon?

Amazon is on deck to report earnings after the bell on Thursday, hoping to avoid suffering the same fate as some of its Big Tech peers who have recently reported their results.

One of those peers, Meta Platforms, is suffering perhaps the most obvious example of a fate from which Amazon would like to be spared. The company formerly known as Facebook dropped more than 20% in after-hours trading Wednesday, and is currently off more than 25% as of midday Thursday.

Amazon could be headed for a similar earnings outcome — albeit perhaps not quite as dramatic of a drop — if the options market is to be believed. Bearish bets outpaced bullish bets on Wednesday, and one trader is wagering a big chunk of change on a sizeable fall in the stock.

"The market is currently implying a 4.8% move [in either direction] on earnings versus a 4.2% move we've seen over the last eight quarters, but one options trader is betting that that downside could be more than double that, buying 449 contracts of the Feb. 11 2800/2700 put spreads for $14," Tony Zhang, chief strategist at OptionsPlay, said Wednesday on CNBC's "Fast Money."

"To put that into context, that's risking about $628,000 in premium to potentially make $3.8 million if Amazon drops more than 10% by Friday of next week," said Zhang.

A 10% decline would be less than half of the fall experienced so far by Meta Platforms, but would wipe more than $140 billion off of Amazon's market cap, which currently stands at about $1.42 trillion.

Amazon was down more than 6% in Thursday afternoon trading.

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