Implied Volatility Trade on Amazon: Firing Line

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Top Gun Options) -- Our Top Gun Options Strategic Mindset: Playing IV drop from earnings announcement

Target: Amazon(AMZN) trading at $193.88

Commit Criteria: Amazon has its Implied Volatility (IV) in the near term weekly options at an excessively high 128%. The March expiration options have an IV of roughly 48%.

Right after the earnings Announcement tonight the IV of AMZN will drop significantly. By selling a position in the near term weeklies and protecting ourselves in the Advanced Model Portfolio with the March expiration options, we should be able to capture the crash in IV while keeping moderately protected from price movement.

We are looking for possible price movement but for it to stay between the $170 to $220 price range until the exit of this trade. We will likely hold this trade until the weekly short positions expire, giving us the maximum profit.