Currency pairs and commodities are not the only underlying assets that binary options traders are interested in and Amazon stock remains as appealing as ever. Each time the company releases a new device the prices change dramatically, which makes it a great moment to open a position. The question is whether the release of the latest Kindle and Kindle Fire will boost Amazon’s shares or the prices will go into the opposite direction.
Past performance can be a good indicator
In order to accurately predict the way prices will move after the two gadgets will be released on October 1st, we need to pay attention to what happened in the past. The first Kindle was released five years ago and the demand was so impressive that the device ran out of stock in a matter of hours. This led to a steep increase in stock price and the traders who bought weekly call options were generously rewarded.
The second generation of Kindle was even more successful and with consumer confidence sky high, the stocks enjoyed a massive 40% increase from the closing price on the day when the Kindle 2 was released. This happened after just two months and then the prices slowed down their surge but there were no significant dips. The third Kindle was another hit and both the Wi-Fi and 3G sold like hot cookies while the stocks gained once against close to 40% worth, in a bit over two months. When the last version of Kindle hit the stores, the increase in stock price was considerably less than expected, with a gain of 7.4%.
Weekly call options are the way to go
What will happen next will depend on how the latest Kindle and Kindle Fire are perceived by the audience and what kind of reviews they receive. Amazon set the bar fairly high and the competition is stiff, so the new gadgets need to be spectacular for the stock to rise as much as it did with the first three versions. Investors should expect only a moderate increase, something similar to what happened when the last Kindle hit the stores.
Given the fact that so far no Kindle released was followed by a dip in price, it makes perfect sense to stick with what worked in the past. Betting on an increase is what binary options traders should do, without pushing the envelope and taking unnecessary risks with options that have a distant expiration date. Buying Amazon stock is not a mistake, despite the fact that the company will post a large decline in operating profit, since this is triggered by the massive investments that were made in the new Kindle.
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October 15, 2012 | by Florin Paguba |