Covered Call Position Established in Amazon.com Inc.

This morning I established a new Covered Call position in Amazon.com Inc. (ticker AMZN) when my buy/write net debit limit order was executed at a price of $212.40.  One hundred shares were purchased at $221.43 and 1 July 18th, 2025 $215.00 Call option was sold at $9.03 per share.  So, the maximum potential time value profit if the stock is in-the-money and therefore closed out by assignment on the options expiration date is $2.60 per share [$9.03 Call option premium - ($221.43 stock purchase price - $215.00 strike price)].  The probability that the Call option will be above the $215.00 strike price on the July 18th options expiration date when this Covered Call position was established was 70.0%.

I have another existing Amazon Covered Call position that will expire today on its options expiration date.  Because of my continuing bullish sentiment regarding Amazon's growth prospects, I decided to establish this new position today with an expiration on July 18th (15 calendar days from today). I prefer short-term (less than 30 days duration) positions since: (1) the potential annualized return-on-investment is higher for shorter-duration positions; and (2) short-term positions provide us a more frequent opportunity to re-evaluate the existing positions, so we can react quickly if news causes a substantial stock price volatility decline -- whether bullish or bearish. 

 

Amazon is the leading market cap company in the Consumer Discretionary sector by a very large margin.  JP Morgan's analyst recently noted that Amazon will surpass Walmart this year (for the first time) as #1 in total retail sales in the U.S.  Of course, Amazon also benefits tremendously in the Information Technology sector since its Amazon Web Services (AWS) is the world's #1 cloud computing platform.  

There are 53 Wall Street analysts that cover Amazon.com and their current average target price is $243.78 (+10.1% above today's stock purchase price).   As detailed in the chart below, Amazon passes all 20 criteria in my "Next Year Growth > P/E; and 5-Year PEG Ratio <1.4" stock screener.  Also, the London Stock Exchange Group rates it as an 9 for their Average Score and 10 for Optimized Score (on a scale of 1 to 10).   

As detailed below, a potential return-on-investment result is +1.2% absolute return-on-investment (equivalent to +29.7% annualized return-on-investment for the next 15 days) if the Amazon.com Inc. share price is in-the-money (i.e. above the $215.00 strike price) and the stock is therefore assigned on its July 18th, 2025 options expiration date. 

Amazon.com Inc. (AMZN) -- New Covered Call Position

The net debit buy/write limit order was executed as follows:
7/3/2025 Bought 100 shares of Amazon.com stock @ $221.43 per share.  
7/3/2025 Sold 1 AMZN July 18th, 2025 $215.00 Call option @ $9.03 per share.
Note: this was a simultaneous Buy/Write transaction and the Implied Volatility of the Call was 27.7 when this position was established which, as preferred, is well above the current VIX of 16.5.  

A possible overall performance result (including commissions) if this position is assigned on its 7/18/2025 options expiration date is as follows:
Amazon.com Covered Call Net Investment: $21,240.67
= ($221.43 - $9.03) * 100 shares + $.67 commission

Net Profit Components:
(a) Option Income: +$902.33
= ($9.03 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Amazon.com stock is above the $215.00 strike price at the July 18th, 2025 options expiration date): -$643.00
= ($215.00 strike price - $221.43 stock purchase price) * 100 shares

Total Net Profit Potential (If AMZN is in-the-money and therefore assigned at the $215.00 strike price on its 7/18/2025 options expiration date): +$259.33
= (+$902.33 option income + $0.00 dividend income - $643.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.2%
= +$259.33/$21,240.67
Potential Equivalent Annualized-Return-on-Investment: +29.7%
= (+$259.33/$21,240.67) * (365/15 days)