AMZN bull put spread: credit, risk, strikes

You are still selling downside — just not all of it. The long $255 put cuts the tail off below that level, which is why this needs $364 of buying power instead of the $26,000 a cash-secured put would tie up.

Above $260 at August 28, 2026, both puts expire worthless and you keep the full $136. Below $255, you lose the maximum $364. Breakeven is $258.64.

Return on risk is 37% for 27 days — 505% annualized. That headline is the reason people prefer spreads to cash-secured puts, and the reason spreads blow up accounts: the same capital supports several times the notional risk.

Between the strikes the loss scales linearly, so most of the damage happens fast when AMZN breaks $260. There is no assignment-and-hold escape hatch: the long put you own expires the same day.

Early assignment on the short leg leaves you long 100 shares plus a long put — a synthetic call, not a disaster, but a position you did not choose and one that requires $26,000 of cash on Monday.

Liquidity is a risk, not a convenience. The moment you most want out of a short-premium position is the moment the spread is widest, and the exit price you modelled at mid will not be available.

The absence of a dividend removes the single most common reason an American short call gets exercised early, which makes Amazon materially easier to manage than a payer at the same delta — you can carry an ITM short call to expiry and reason about it purely on extrinsic value. That administrative edge is worth more to a systematic writer than a point or two of extra IV elsewhere.

AMZN's Aug 28 strikes are $5 apart near the money (1.84% of spot). Coarse enough that the strike you want frequently does not exist, and the nearest rung is a different trade. 16k contracts of open interest on Aug 28 is workable around the money and thin in the wings — width costs more here than the ladder suggests. 23 strikes on that expiry — 50% of the board — carry prints that agree with their own implied volatility and hold up across the ladder, and those are the strikes priced here. Deep at every strike; the far-dated back month a calendar needs is liquid enough to leg if you must.

Skew is inverted: the 25-delta CALL implies 1.3% more vol than the put. That is the market pricing upside risk above downside risk — a squeeze, a takeover rumour, or a crowded short. Selling calls into an inverted skew pays better than usual and is riskier than usual for exactly the same reason. The term structure is flat inside 1.5% between the two captured expiries, so there is no calendar edge to harvest and no event visibly priced into one month over the other.

At 33% ATM implied vol, the Aug 28 options are pricing a one-standard-deviation move of $24.05 over 27 days — roughly −8.9% to +8.9%, or $247.53 to $295.63. The structure above sells the part of that distribution the market thinks it will not reach. Whether that is a good trade is entirely a question of whether 8.9% is too much or too little for AMZN over 27 days — the delta table cannot answer that, and neither can we.

What actually goes wrong here, as opposed to in general: Buying the holiday-quarter straddle because the narrative is loud. That print's implied move is usually the year's largest and usually adequate.