Amazon Hedge Strategy Emerges as Short-Term Momentum Weakens

Investors who own shares of Amazon (AMZN) may want to consider a bearish hedge strategy, particularly given the recent weakening of short-term momentum. With the stock currently trading around $252, below its 20- and 50-day averages, technical data suggests that the RSI is near 38 and the MACD is negative.

A bear put spread may be an effective hedging tool in this situation. Instead of buying a naked put, investors could consider purchasing a $250 put option while selling a $235 put option with roughly 30-60 days to expiration (DTE). This strategy provides downside protection and reduces the premium cost, but comes with the trade-off that the maximum hedge payoff is capped below $235.

According to the trading framework outlined in this analysis, if AMZN falls below $250, it would be considered a bearish confirmation. The next meaningful downside zone would then be around $240-$235. Conversely, if Amazon recovers and closes above $261, the analyst would become less bearish and consider removing the hedge.