Preface
With the market's direction becoming tenuous, we can explore option trading opportunities in Amazon.com Inc (NASDAQ:AMZN) that do not rely on stock direction. It turns out, over the long-run, for stocks with certain tendencies like Amazon.com Inc, there is a clever way to trade market anxiety or market optimism before earnings announcements with options.



The Trade Before Earnings
What a trader wants to do is to see the results of buying an at the money straddle a few days before earnings, and then sell that straddle just before earnings.

This trade is not a panacea, which is to say, we have to test it, stock by stock, to see when and why it worked. We start with Amazon.com Inc.

Here is the setup:



We are testing opening the position 7 calendar days before earnings and then closing the position 1 day before earnings. This is not making any earnings bet. This is not making any stock direction bet.

Once we apply that simple rule to our back-test, we run it on an at-the-money straddle:

Returns
If we did this long at-the-money (also called '50-delta') straddle in Amazon.com Inc (NASDAQ:AMZN) over the last three-years but only held it before earnings we get these results:

AMZN
Long At-the-Money Straddle

% Wins: 50.00%
Wins: 6 Losses: 6
% Return:  24.9% 

Tap Here to See the Back-test

The mechanics of the TradeMachine™ are that it uses end of day prices for every back-test entry and exit (every trigger).



Track this trade idea. Get alerted for ticker `AMZN`  7 days before earnings

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We see a 24.9% return, testing this over the last 12 earnings dates in Amazon.com Inc. That's a total of just 60 days (5 days for each earnings date, over 12 earnings dates). That's an annualized rate of 151.5%.

We can also see that this strategy hasn't been a winner all the time, rather it has won 6 times and lost 6 times, for a 50% win-rate and again, that 24.9% return in less than two-full months of trading.

Here is a 1-minute and 25-second video that shows you exactly how to do this for any stock and what every professional option trader would rather that you don't see.

Learn more here: Try the Back-tester Yourself

Setting Expectations
While this strategy has an overall return of 24.9%, the trade details keep us in bounds with expectations:
      The average percent return per trade was 3.5%.



WHAT HAPPENED
This is it -- this is how people profit from the option market -- finding trading opportunities that avoid earnings risk and work equally well during a bull or bear market.