Amazon options bet on range-bound stock despite record revenues
Trader Mike Khouw is using a "jade lizard" options strategy on Amazon, betting the stock's post-earnings surge will stall as markets digest massive capital expenditure plans.
Options trader Mike Khouw is betting Amazon shares will remain trapped in a tight trading range through late September, employing a "jade lizard" strategy to profit from the stagnation. The trade targets a stock that has effectively gone nowhere since a 15% post-earnings surge on July 30th. With few imminent catalysts expected before the next quarterly earnings release, Khouw anticipates the sideways price action will persist.
The muted market reaction contrasts sharply with Amazon's underlying operational scale. The company recently secured the number one spot on the Fortune 500, displacing Walmart's long-running tenure. In the 72-year history of the ranking, only General Motors and ExxonMobil have previously held the top position.
Despite this historic revenue dominance, the stock trades at a near-market multiple of just 22 times fiscal year 2027 adjusted earnings per share estimates of $12.35. Analysts project fiscal 2026 revenues will surpass $828 billion, a 15.5% year-over-year increase that equates to more than 2.5% of total US gross domestic product.
The compressed valuation reflects deep investor anxiety surrounding the massive capital expenditures currently demanded by cloud hyperscalers. Amazon's forecasted capital expenditure for fiscal 2027 approaches $280 billion. However, this concern may overlook the company's cash generation, as forecasted EBITDA for the same period is also expected to exceed $280 billion. Amazon can comfortably afford these investments and remains uniquely positioned to monetize them.
For traders convinced the stock will not break out to new all-time highs before late September, Khouw suggests a jade lizard. This involves selling a short strangle—the September 25 $240 put and the September 25 $300 call—while purchasing a higher-strike September 25 $320 call as a hedge.
The structure profits as long as Amazon avoids significant upside breakouts or drops below pre-earnings levels. In a worst-case scenario where the stock surges, the long $320 call caps the risk. If the stock falls, the trader is obligated to purchase shares at roughly the pre-earnings price, a level already deemed reasonable by fundamental metrics.
