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Exploring a conservative way to buy Amazon shares at a lower level
Options 10 minutes to read
Koen Hoorelbeke
Investment and Options Strategist
Summary: This article explains how long-term investors can plan to buy Amazon shares at a lower price using a simple, conservative approach. It walks through an educational example of how setting a predefined entry level and reserving cash can help manage both risk and opportunity around earnings.
Exploring a conservative way to buy Amazon shares at a lower level
Ahead of earnings, here’s a simple and controlled way to own shares at a lower price—or earn a cash buffer while you wait.
The idea
Amazon will release its quarterly results this week. The stock often moves sharply around such announcements, and that uncertainty increases what option traders call implied volatility – the market's expectation of how much the price could move. This higher volatility means option prices are more expensive than usual, which creates opportunities for investors who sell options.
For investors who would like to own Amazon shares but prefer to do so at a lower price, a cash-secured put can be a conservative and patient strategy. It allows you to set the price at which you would be happy to buy the shares and, in the meantime, earn some income from selling the option.
In plain terms, you commit to buying 100 shares of Amazon at a specific price (called the strike price). You sell a put option that gives another investor the right to sell those shares to you at that price. In exchange for taking that obligation, you receive a cash payment upfront, known as the premium.
If Amazon’s share price stays above your chosen strike price by the time the option expires, nothing happens – you simply keep the premium as income. If the price drops below your strike, you will be required to buy the shares at that price. But even then, you keep the premium, which slightly lowers the cost of those shares.
Important note: The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.
The setup
Let’s look at an example.
- Stock: Amazon (AMZN)
- Current price: about USD 227
- Option expiry: 31 October 2025 (the first Friday after earnings)
- Strike price: USD 210
- Premium received: about USD 1.52 per share (USD 152 total for one contract)
- Cash set aside: USD 21,000 (enough to buy 100 shares at USD 210)
That means your effective entry price would be about USD 208.48 (the strike price minus the premium you receive). In other words, if you end up owning the shares, it will be as if you bought them at USD 208.48 instead of USD 227. That’s roughly an 8% discount from today’s price.
The short-term yield on this example is roughly 0.7% (USD 152 on USD 21,000 over a few days). This is a simple way to understand the potential return on the reserved cash, but it should not be annualised or used for comparison, as this trade carries event risk due to earnings.
The reason for choosing the 210 strike is that, based on current option prices, the market expects Amazon’s share price to move roughly USD 15 in either direction after earnings. By choosing a strike below that range, an investor positions below the likely short-term move, with a bit of extra cushion.
Open interest (the number of contracts outstanding) is also quite high around this level – more than 12,000 contracts. This can act like a temporary point of attraction for the price as traders adjust their positions after earnings.
What can happen
1. Amazon stays above USD 210
The put option expires worthless. The investor keeps the USD 152 premium, and the cash is released for other opportunities.
2. Amazon falls slightly below USD 210
The investor is assigned 100 shares at USD 210 each, but because they received USD 1.52 per share in premium, the effective purchase price is USD 208.48. They now own the shares at a lower price and can consider selling another option later (for example, a covered call) to generate more income.
3. Amazon drops sharply after earnings
If the price falls far below 210, the investor will still have to buy at that price, which means starting with an unrealised loss. They could choose to roll the option (buy it back and sell a new one at a lower strike and later date) to improve the entry point, or accept the shares if they believe in Amazon long term.
Why long-term investors might use this approach
A cash-secured put aligns with a patient investor mindset. If the stock price stays high, there is a small short-term gain from the premium. If the stock price falls, shares are bought at a lower price already chosen in advance. Either outcome can make sense for investors looking to build a position gradually rather than buying all at once.
This particular setup also benefits from higher option premiums around earnings. Once the results are out, volatility often drops, and option values can shrink quickly. This can work in favour of the option seller, although results may vary.
The key risks
- Market risk: If Amazon drops well below the strike price, the shares could be worth less than what the investor pays.
- Event risk: Earnings announcements can cause unexpected swings, even for large, well-known companies.
- Opportunity cost: If the stock jumps sharply higher, the seller only keeps the premium and misses the rally.
- Capital requirement: Enough cash must be held to buy the shares if assigned. This is what makes the position cash-secured.
How it could be done step-by-step
- An investor decides on a price where they would genuinely like to own 100 shares of Amazon.
- They keep enough cash in their account to cover the purchase (USD 21,000 in this example).
- On their trading platform, they sell one AMZN 210 put expiring 31 October 2025.
- After earnings, they monitor the position. If the option value falls to a small amount, it may be closed early to lock in most of the premium.
- If assigned, they can review whether to hold the shares or use another conservative strategy, such as selling covered calls.
FAQ
What does “cash-secured” mean?
It means having enough cash set aside to buy the shares if the option is exercised. This keeps the approach conservative and avoids leverage.
What is a put option?
A put option gives its buyer the right (but not the obligation) to sell shares at a set price. When someone sells a put, they agree to buy those shares if the buyer decides to sell them.
What happens if I don’t have enough cash to buy the shares?
Selling cash-secured puts without the required funds adds risk and is not suitable for beginners.
Why is the option premium higher before earnings?
Before results are announced, the future move is uncertain. That uncertainty increases the value of options, which makes selling them more rewarding—but also riskier.
Can I lose money with this strategy?
Yes. If Amazon’s share price drops far below the strike price, the investor may end up buying shares that are worth less than what they paid. However, compared to buying at today’s price, the entry cost would still be lower by the amount of the premium.
This content is marketing material and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The Author is permitted to wait at least 24 hours from the time of the publication before they trade the instruments themselves.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options.
This content will not be changed or subject to review after publication.
The Author is permitted to wait at least 24 hours from the time of the publication before they trade the instruments themselves.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options.
This content will not be changed or subject to review after publication.
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