A 'Most Unusual' Amazon Short Opportunity

Jay Shartsis of R.F. Lafferty said Amazon.com, Inc. (NASDAQ: AMZN) is a strong short sale candidate.

Shares of the online retail giant have dropped 14.66 percent this year and underperformed the benchmark S&P 500 index, which declined only 0.65 percent. The stock is also about 15 percent lower than its December 29 peak of $696.44.

"First of all, it has been appearing daily in our diminished IV study, which is designed to identify short sale candidates. Next, many of its call options are trading far, vary far below their "theoretical" values," Shartsis wrote in a note to clients.

Related Link: Sunedison Arguably The Most Expensive Stock To Short On The Market

Shartsis pointed out that Amazon's April 620 call "theoretically" worth $3.50, is only 0.69 bid, which is nearly 80 percent below that "theoretical" figure. He said, "I don't recall ever seeing such a dramatic undervaluation in Amazon calls."

A short call spread, in its simplest form, is a strategy used to take a bearish bet. A trader will sell call options at a specific strike price and buy the same number of calls at a higher strike.

Shares of Amazon were recently down 0.88 percent to $587.97.