Startup firm Oyster, a new online e-book store, is betting that consumers will flock to their subscription based model where a flat monthly fee will give them access to millions of e-books online. All 5 major publishers have given their support to the venture and are most likely hoping that Oyster becomes a viable competitor to firms like Amazon, Apple and Google. Now that Oyster has the support of the major publishers do they really threaten Amazon? Even if Oyster is able to snatch away market share from Amazon it’s not likely the move will have a measurable effect on Amazon earnings so what should an investor do with the stock.
Amazon.com, Inc. (AMZN) is closed today’s session around $381.20 and has been trading in a 52 week range of $284.00-$389.37. The stock has been doing very well this year, rallying nearly 23% year to date. Stock broke out this year after spending the majority of last year trading in a range. Investors became frustrated with low margins and investments in lower margin businesses. With AMZN break our this year how can a trader get long the stock without having to lay out all of the capital it would take to buy the stock?
Let’s look at a stock replacement strategy in AMZN.
Trade: Buying the AMZN Jul 350 calls for $41.00
Risk: $4100 per 1 lot
This position will have a very similar P/L profile to the long stock and has a much more defined max loss.