To The Moon

Amazon Bears Load Up on Options as Trade War Fears Spur Sell-Off

$Amazon.com(AMZN)$   saw investors and large speculators build bearish positions on its options Tuesday amid fears of a global trade war that could crimp profits for the world’s largest online retailer. 

Shares of the company that's also the biggest player in cloud computing fell as much as 3.7% to the lowest since late November amid a broad sell-off in the stock market. That came after President Donald Trump imposed 25% tariffs on goods from Canada and Mexico and doubled those leveled against shipments from China, triggering retaliatory levies. 

Majority of the block trades of Amazon options contracts posted so far were bearish, exchange data showed. The biggest of those trades involved an active buyer paying an $8.58 million premium for put options that give the holder the right to sell 500,000 Amazon shares at $220 each by March 21. 

Canadian Prime Minister Justin Trudeau said Trump’s fentanyl excuse for imposing the tariffs “is completely bogus, completely unjustified and completely false." He said the US President’s objective is to destroy Canada’s economy so he can annex the country. 

More than 680,000 call and put options changed hands as of 2:12 p.m., landing Amazon in third place for the most active stock options, behind Nvidia and Tesla, data showed. 

Before the tariffs took effect, a survey found that the majority of Canadian consumers cut their spending on Amazon.com since Trump escalated his threats against the North American country, Bloomberg reported yesterday. 

That's not the only concern investors face with Amazon. 

Retailers including Amazon, which sell high volumes of fresh produce “could see costs rise” as a result of the 25% tariff on products from Mexico, Bloomberg Intelligence analysts wrote in a note March 4.

“This can take the form of higher wholesale prices from Mexico or higher transportation expenses for items from countries farther away, driving up prices for consumers," the BI analysts said. “The US is heavily reliant on imports of key crops from Mexico, including avocados, tomatoes, berries, strawberries, peppers and citrus.”

While Amazon was named by JPMorgan analysts as their favorite e-commerce stock, they cited the risks from potential changes to the de minimis tax exemption that could impact retailers with China sales and inventory sourcing exposure.  

The lifting of the de minimis tax exemption, which covers packages valued at less than $800, was delayed until Trump's administration develops a plan for collecting revenue on these imports, according to Bloomberg.   

More than 70% of wholesalers and retailers who sell on Amazon source their products from China, Statistica said in its website in November, citing a survey by Jungle Scout. 

Amazon shares bounced off the days lows to trade little changed at $205.08 at 2:08 p.m. in New York. 

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