Most of the time we’re focused on reasonable trades with plenty of delta and plenty of time to play out. This one isn’t aren’t really in that category. That doesn’t mean it won’t work — but 1DTE trades come with a lot of risk. Keep that in mind, and don’t bet the house.

Still, I’ll be honest with you. I love this trade. Here are a few reasons why.

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Cost

Volatility is very low, and despite Amazon being prone to some above-average moves, these options are relatively cheap for at-the-money calls (bought for an average price of $0.77 per contract, these carry a rough breakeven of $112.77 for the buyer). Simply put, if you’re going to buy options that are about to expire, you want them to be cheap

Size

The buyer picked up a lot, lot, lot of these contracts. For those who don’t see UOA all the time, it can be tough to understand what “a lot” of contracts in a single purchase is. So to give you a relative comparison: On our log of “particularly unusual” trades, this Amazon trade has the highest contract-count of any we’ve seen today. That doesn’t mean this is the largest option trade of the day — it’s just the highest unusual one. Basically, 28,600 options means this guy came to play.

Macro

CPI came in light yesterday, essentially satisfying the markets requirements for a continued churn higher. Things that are outperforming that “slow churn” include big tech names (especially those with AI sensitivity). Also outperforming are companies that have shown they can cut costs where it counts. Amazon is doing that in spades. That’s a big part of why Amazon was Jon Najarian’s number one pick for the next quarter.

Wrapping up

As always, with trades like these you have to size your position accordingly. In poker, the difference between a good player and a bad player often comes down to bet sizing. The same is true in trading. This is a low-cost option for a reason — you have about a day and a half for this to go right. For me, I’ll be using AJ Monte’s 1% rule. That means no more than 1% of my account value will go to this position.

Sticking with our poker theme, you have to know when to fold. Have a plan in place just in case Amazon starts going sour. For me, I’ll be using Jon Najarian’s risk management rule of thumb — if the option gets cut in half (50% of my original value), I’ll take the loss and move on. If the option doubles (100% gain in my original value), I’ll take the profit. Pretty simple, and I like that.

Most importantly, whatever your plan is, stick to it. It can be easier said than done when you see a short-term trade rack up the type of percentage-gains that some stock traders can only dream about — but many talented traders have been humbled by holding a position too long. In other words: Be safe out there.

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