Amazon (AMZN) is on track for a losing week and a fourth straight losing session. This follows big gains over the prior two weeks driven by earnings. The stock hit a new high of about 287 on the earnings news and now trades near 263, down about 8% from those recent all-time highs. The stock jumped over 15% on the last earnings report.
The Bull Case
Amazon Web Services (AWS) revenue grew 37% last quarter, up from about 25-26% the prior quarter, marking five straight quarters of accelerating growth. The AWS backlog reached $496 billion and is still growing, with improving margins. Cloud is only about a fifth of total revenue, which topped $200 billion last quarter, but it drives nearly 60% of operating income - so most of the company's profit. Overall revenue grew 20%, above expectations, helped by Prime Day sales that stretched into the quarter.
Advertising is now another growth driver, running above $60 billion a year, alongside Amazon Prime. The company operates across streaming, cloud, e-commerce, and keeps investing in logistics to make delivery faster - orders from a nearby fulfillment center now often arrive within a day. In my view the competitive game is largely over and Amazon has won in most segments, setting the industry standard for customer service and convenience.
The stock languished earlier because of the capex scare that hit many names, but strong earnings pushed it up, and it has since settled into a decent range. Josh Kushner's Thrive Capital invested $215 million in Amazon, according to Bloomberg.
The Bear Case
The main wild card is whether cloud growth rates slow down. Other risks: will the consumer come back, and could a weaker consumer hurt results? Valuations are not outsized, so the concern is growth deceleration and consumer demand rather than an expensive stock. Jeff Bezos recently sold about $4 billion of stock, possibly to help fund his purchase of a 30% stake in Liverpool Football Club.
Retail also secured about $600 million in tariff refunds, which the company will use to keep prices lower.
The Bullish Trade: Call Diagonal
A paper-money bullish call diagonal on AMZN. Buy the September 4th weekly 265 call (about 21 days out, roughly a dollar above the current share price, slightly out of the money). Against it, sell the August 21st monthly 272.5 call, which expires in about 7 days. This makes a $7.5-wide bullish call diagonal for a debit near $5.75 (recently trading around 5.65), which is the total risk - $575 per spread, less than the width of the diagonal.
A diagonal combines two strategies: an embedded vertical spread plus a calendar spread, giving it some duration. Max profit comes if the stock reaches 272.5; anything above about 267 is profitable. The position carries about 30 deltas. Because AMZN has three weekly option cycles per week, the short call can be rolled - for example to the August 24th or August 28th weeklies - to collect credits, which lowers the net debit and break-even and cuts risk each time.
The Bearish Trade: Put Vertical
A more aggressive bearish put vertical, chosen because implied volatility is low - the IV percentile sits near 11%, in the bottom roughly 10% of the last 52 weeks, as volatility left the name after earnings. The VIX hovers around 14.5. Going out to the September monthly (35 days to expiration) gives duration and flexibility, since the trade can be managed before expiration.
Buy the in-the-money September 270 put and sell the September 250 put - a $20-wide bearish put vertical for about an $85 debit, so $850 risk per spread. The value can expand to $20 (worth $2,000) if the stock falls below 250. The 270 put is about $6 in the money with roughly $5.12 to nearly $6 of intrinsic value, giving it a higher negative delta so it reacts more to downside moves and expands the spread faster as the stock drops. The break-even is 261.50, only about $2.50 below the current price, so only a small downside move is needed. The cost is higher because of buying the in-the-money put, but if right, the trade can make about 1.5 times the money - the spread bought near $8 going to $20 more than doubles it.
The debate ends with one bullish call diagonal against one bearish put vertical.
