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Today's editorial pick for you
Amazon (AMZN) Stock Options Point to a Quick Trade with a 113% Payout
Posted On Dec 26, 2025 by Joshua Enomoto
I'll cut right to the chase. With Amazon(NASDAQ: AMZN) stock flashing a relatively rare quantitative signal, there's a reasonable chance that it hits $240 over the next two months. Technically speaking, the narrative centers on the basic idea of reversion to the mean.
Table of Contents
Since Halloween, when AMZN stock was trading above $244, shares of the e-commerce giant are down about 5%. Because the business is fundamentally powerful, along with the fact that Amazon's various modernization initiatives open the door for enhanced cost-cutting strategies, it's quite possible that shareholders can receive a not-insignificant bang for their buck.
Subsequently, AMZN stock could be due for a comeback. Specifically, I'm very intrigued by the 235/240 bull call spread expiring Feb. 20, 2026. If the stock price rises through the $240 strike price at expiration, the maximum payout stands at nearly 113%. For a cash outlay of $235, full profitability would mean a total reward of $265. That's nothing to scoff at, considering that, in the open market, the required move by AMZN stock is about 3.3% from Wednesday's close.
Put in those terms, Amazon stock would seem to be a no-brainer. But here's the catch: on a year-to-date basis, the security has only gained 6%. For Amazon to really gain 3% in a compressed time period requires relatively high confidence. Over the course of this write-up, I'll present an empirical case for why I believe the 235/240 bull spread expiring Feb. 20 is the most logical and efficient trade.
Eliminating Common Misconceptions about Valuation
One of the more common misconceptions in financial trading is to use valuation comparisons without critical context. For example, AMZN stock currently trades at a forward earnings multiple of 28.33. At the end of June this year, the forward multiple was 34 times. Therefore, you might reason that Amazon is undervalued and the market will rerate higher to the appropriate multiple (which is 34 in this case).
However, this line of thinking — while very common and seemingly logical — presupposes that the forward multiple of 34 is the "correct" multiple. If we were to hinge a bullish narrative on this fact alone, we would be committing petitio principii or begging the question. Specifically, we would be smuggling the conclusion (that AMZN stock will move higher) into the premise (that Amazon is undervalued).
The critical issue here is that the premise does the argument's heavy lifting, yet it is also the component that does not receive interrogation.
Consider the hypothetical case of Joe Average, who is hitting only .175 in MLB (Major League Baseball). Due to his poor performance, Joe is designated for assignment. Rather than aimlessly meandering in the minor leagues, he plays for an NPB (Nippon Professional Baseball) team. In Japan, he's hitting .250 and improving in multiple key stats in the clutch. Now, he wants to come back to MLB.
Is Joe Average undervalued? The most intellectually honest answer is "maybe." He would only automatically be considered undervalued if the state of competition between MLB and NPB is invariant. However, every sports fan knows that NPB is a competitively weaker league. To get a truer idea of projected performance for Joe in MLB requires serious analysis — you can't just subtract a "difficulty discount" from his NPB stats and call it a day.
Without turning this into a baseball article, a proper assessment requires careful consideration of highly detailed stats, such as pitch recognition and quality of contact across a variety of competitive conditions.
What gets lost in the discussion is that we can conduct similar rigorous, quantitative research to better inform our trading decisions.
Measuring the Risk Geometry of AMZN Stock for Superior Outcomes
If someone asked you to create a formula for love, you would be at a loss, largely because the assignment would be a category error. As an emotion, love is boundless and therefore is not measurable. However, the impact of love — such as marriage rates and their longevity — is very much measurable. I would also argue that, given enough information and context, collective marriage rates for specific demographics are predictable.
For AMZN stock, my thesis is that we can apply the same logic to yield probabilistic insights. Looking at AMZN's price data directly, it would be a category error to quantify it as price action is theoretically unbounded — it can go anywhere from zero to infinity. However, we can artificially apply parameters around price action.
This is why I compress past data into "up weeks" and "down weeks." With this discretization process, we're now observing structures as opposed to continuous, unbounded noise. From here, we can layer price data into a hierarchical framework.
If we took a single strand of 10-week price data of AMZN stock, the return during this period won't tell us anything about the probability of performance for the other weeks in the dataset. However, if we stacked hundreds of rolling 10-week sequences in a fixed-time distribution, the most consistent, frequent behaviors would create a bulge in probability mass.
This bulge is risk geometry, which tells us how bullish sentiment among buyers ascends. More importantly, risk geometry also reveals the point where buyers are tempted to become sellers. This way, we know how far we can push — and where we should back off.
Going back to AMZN stock, the security printed a 4-6-U sequence; that is, in the trailing 10 weeks, AMZN only generated four up weeks yet the slope during this period was positive. Under this unusual setup, primary price clustering over the next 10 weeks would likely occur at $235 (assuming an anchor price of $232.38). However, secondary clustering may materialize around $241.
Based on probabilistic trends associated with the 4-6-U sequence, there's a solid chance that $240 is within reach. Therefore, I'm a big fan of the 235/240 bull call spread expiring Feb. 20, 2026.
Probability Decay Makes the Call Spread Efficient
To be sure, it's not just the potential of AMZN stock reaching $240 that makes the aforementioned call spread enticing. It's also the rate of probability decay.
Between $240 and $245, the probability density drops by 70.47%. Between $245 and $250, density absolutely tanks by nearly 99%. In other words, the likelihood of AMZN stock reaching $250 isn't impossible. However, it's quite unlikely. Therefore, it doesn't make much sense to buy premiums associated with events that might not materialize.
Instead, it may be more prudent to sell the premium associated with these strike prices in a bid to discount the portion of the spread that is realistic. That's what a bull call spread does, but you have to know the transition of where buyers become sellers.
That's where risk geometry comes in. When I say that I'm a fan of the 235/240 bull spread, this sentiment is based on pure empirical logic, not vibes.
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