Amazon (AMZN) released earnings this past Thursday after the market closed. No one knew for sure what would happen at the earnings call. It was all a bet. If you are in the right, you make money, if you are in the wrong you lose money. It is that simple.
That’s pretty much what trading is all about. You can look at as many charts as you want but unless you are swing trading, its very difficult to pull in earnings more than 80% of the time. In fact, even that number is reserved for elite traders. I try to be one of them, doesn’t always fan out on a yearly basis but I do alright for myself.
But let’s get into the meat of this post. Amazon, all the naysayers are silent now. They were saying the stock is over priced, margins are thin and so and so but again, as he has done many times, Jeff Bezos proves them wrong. Unlike Apple, a stock that has been on a steady decline under Tim Cook, amazon has done quite the opposite. Why? Because amazon is a perpetual start up company.
And when the stock pops, it pops. That’s precisely what happened this past earnings. The stock rose about 8% in the after hours. Here is what the chart looked like:
And that beautiful chart there resulted in something beautiful in my account.
At the beginning of October, I bought three call options that I held up to. They were for the December 15 expiration date. Although I bought them at two different intervals during the month, the stock was sliding and I got in too early for the most part.
Before I knew it, I was down $6,000, yes my account had lost six thousand dollars towards the middle of the month.
But of course I didn’t buy the options because I wanted a short term gain. A lot of people would have panicked and sold at a loss. And I admit, I did for day or so because I didn’t expect the loss to be so great before my target, earnings release.
But then, it recovered a bit, I gained $2,000 from the $6,000 I was down and my loss was now $4,000. I broke one of my cardinal rules, do not trade on emotions. So I sold one contract and was down to two a day before the earnings. I held on to the other two contracts.
The target day arrived and earnings were going to be reported. I was ecstatic because I knew that Amazon was going to beat. The acquisition of Whole Foods was a grand move and I knew that was going to help their bottom line.
Little after four thirty, earnings were reporting. Mind the time difference, I am living in Dubai at the moment so for me it was late at night. I went to bed smiling and woke up to this:
Take a look at the daily profit at the top. Yeah you would smile too.