Amazon Stock is Still Very Undervalued and Shorting OTM Puts Makes Sense Here

Amazon Inc. (AMZN) reported strong free cash flow FCF margins last quarter. That implies that AMZN stock could be worth between 18% and 58% more. For existing shareholders, it makes sense to hold on and short OTM puts for extra income.

I discussed this strategy in my Feb. 12 Barchart article, “Shorting AMZN Puts Makes Sense Here for Existing Shareholders, Given its High Put Premiums.” At the time AMZN stock was at $173.46 and I recommended selling short the $167.50 put option expiring March 1 for $1.26 in premium. That put option expired worthless and the trade was successful as the investor made an additional 0.75% in income (i.e., $1.26/$167.50) in just 3 weeks.