How To Trade Amazon Stock Today

After the big Prime Day 2020 event, with $9.9 billion fresh on the books… AMZN shares sank like a stone for weeks until the end of October. Traders did what traders do and sold the news.

This most recent earnings season is another example; Amazon, Apple Inc. (Nasdaq: AAPL), Alphabet Inc. (Nasdaq: GOOG) all hit Wall Street with great numbers – strong beats almost all the way across the board – and all of them sold off.

AMZN shares are up nearly 10% year to date and a little less than 8% over the past month. So Amazon's certainly coming into Prime Day 2021 in strong shape. The thing is, no matter how good the past two days' numbers are, history and momentum tell us it won't be enough to keep the rally going.

That's why it's absolutely critical you make this trade when the market opens on June 24.

How to Trade and Fade AMZN Today

There are a few different ways you can make money on a stock that's sinking…

You can sell it short, "borrow" stock on margin, and "return" it for a lower price, pocketing the difference. This can be incredibly risky – particularly if you've made Reddit angry – because your losses are theoretically limitless. A stock can only go as low as $0, but there's no "ceiling." Leave this strategy to deep-pocketed hedge funds, or at least the ones on Reddit's good side.

For us sensible, mere-mortal types, profiting on a stock's decline means trading put options, which increase in value as a stock's price declines. The most straightforward way to do this is to buy puts. That can be a great, easy strategy, but when it comes to AMZN, there's a "significant" wrinkle. You're risking an awful lot there – just a single share of Amazon will set you back more than $3,500 as of midday Wednesday, and options cover groups of 100 shares.

The name of our game is "asymmetrical," remember? We want low risk and high reward.

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Disclaimer: Any performance results described herein are not based on actual trading of securities but are instead based on a hypothetical trading account which entered and exited the suggested ...

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