Heavy, Unusual Volume in Amazon Options Ahead of Earnings in Two Weeks

A Barchart report today shows huge, unusual volume in Amazon Inc. (AMZN) options ahead of its earnings due out at the end of the month. Investors are piling into AMZN stock ahead of earnings, as well as from a recent CNBC report that OpenAI is partnering with Amazon.

AMZN is up over 4% today at $249.55, up from a recent low below $200 on March 27 ($199.34). However, it’s still below a 6-month peak of $254.00 on Nov. 3, 2025.

Investors are clearly expecting its upcoming revenue and cash flow to surprise on the upside.

For example, Andy Jassy, Amazon’s CEO, recently wrote to shareholders on April 8. He said that Amazon is in the middle of the AI “land rush” and that customers are choosing AWS (its cloud division) for their AI needs.
Moreover, analysts have been hiking their revenue projections for Amazon. For example, Yahoo! Finance reports that 59 analysts project $807.62 billion for this year and $901.48 billion for 2027. That’s over 25.7% higher than the $716.92 billion in revenue during 2025.

As a result, estimates for its cash flow could push AMZN’s value significantly higher over the next year.

Last quarter, Amazon’s operating cash flow rose 19.33% YoY to $54.459 billion according to Stock Analysis, and was up +53.3% QoQ. However, its quarterly free cash flow (FCF) fell 16%, due to higher capex spending.

Nevertheless, over the trailing 12 months (TTM), the way Amazon likes to measure its cash flow, it generated $139.5 billion in operating cash flow (i.e., before capex spending), representing 19.5% of its $716.9 billion in revenue. However, its capex spending rose significantly to $131.8 billion, leaving less free cash flow.

So, assuming Amazon generates $901.5 billion in revenue next year, it could generate $176 billion in operating cash flow (OCF). So, even if capex rises 10%, there will be plenty of FCF:

$901.5 b revenue 2027 x 0.20 = $180.3 billion OCF

$180.3 b – ($131.8 capex x 1.10) = $180.3 – $145 b capex = $35.3 billion FCF

That could lead to a significantly higher market value for AMZN stock.

For example, using a 1.0% FCF yield metric (i.e., assuming the market values its FCF at 100x FCF), AMZN stock would have a $3.5 trillion market cap:

$35.3 billion x 100 = $3,530 billion mkt cap

That’s 31.4% higher than its present market value of $2,685 billion, according to Yahoo! Finance today.

In other words, AMZN stock’s price target (PT) over the next year could be 31.4% higher:

$249.55 price today x 1.314  = $327.91 PT

Other analysts agree that AMZN stock is undervalued. Yahoo! Finance’s survey of 68 analysts shows an average PT of $281.18. Similarly, Barchart’s mean survey PT is $286.02.

This undervaluation could be one reason why investors are piling into AMZN options today.

This can be seen in Barchart’s Unusual Stock Options Activity Report today. It shows at least 4 tranches of AMZN puts and calls with significant volume.

One of the more interesting tranches is a $260 call option expiring on May 8, 24 days from now. It shows that over 59 times the prior number of options outstanding have traded at that $260 strike price.

Note that covered call investors receive a $6.42 premium. So, it’s like potentially selling their AMZN shares at $266.42, assuming that AMZN rises to $260 by May 8. That could potentially be a total return of 7.2% over the next 3 weeks.

Moreover, even if it doesn’t rise to $260, these investors still collect a 2.58% yield (i.e., $6.42/$248.55). That could be worth mimicking for regular investors in AMZN stock right now.

The bottom line is that AMZN stock looks undervalued here ahead of its earnings. If operating cash flow continues to stay strong, AMZN stock could rise significantly over the next year.

On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com