Insights 
VT 
Amazon’s stock faced a downturn after the July Nonfarm Payrolls report revealed a sharp decline in hiring, along with increased tariffs by the Trump administration. The report indicated only 73,000 new jobs in July, with previous months corrected to show 260,000 fewer jobs than originally reported, causing the US Dollar to fall 1.3% against the Euro.
In reaction, traders sought US Treasuries, causing yields to drop amid a general market downturn. The tariffs on various countries, including 35% on Canada and 25% on India, added to market concerns, pushing the NASDAQ down over 2% and the S&P 500 and DJIA by 1% to 1.5%.
Amazon’s Performance Amid Market Unrest
Despite Amazon’s strong second-quarter results, which surpassed Wall Street’s earnings expectations, the stock decline persisted. AWS revenue grew 17.5% YoY, though market sentiments hinted at Microsoft’s Azure gaining ground in cloud services, as AWS revenue of $30.9 billion lagged behind.
Tariffs could compel Amazon to alter its supply chain, impacting margins in late 2025. Revised NFP figures indicate a frail labour market, raising recession risks, possibly prompting a Federal Reserve rate cut in September. Amazon stock fell below the 20-day SMA, suggesting a continued downtrend with support levels near $204 and $209.
The weak July 2025 jobs report has injected significant uncertainty into the market, which is ideal for derivative strategies. We have already seen the CBOE Volatility Index, or VIX, jump over 20% in the last two days to a reading of 24.5, its highest level this year. This indicates we should brace for more erratic price movements in the weeks ahead.
With Amazon’s stock price falling below its 20-day moving average, the immediate path of least resistance appears to be downward. We should consider buying put options to capitalize on this bearish momentum. These contracts will increase in value if the stock continues to slide toward its next support levels near $204.
Bear Put Spread Strategy
For a strategy with more defined risk, a bear put spread is an attractive option. By purchasing a put option near the current price and simultaneously selling one at a lower strike, like $200, we can lower our upfront cost. This positions us to profit from a gradual decline while capping our potential loss if the market suddenly reverses.
The new tariffs and the potential for a Federal Reserve rate cut mean implied volatility is likely to stay high. We could buy call options on the VIX to hedge against a broader market downturn. These positions become more valuable as overall market fear escalates.
We can look at the market’s behavior during the 2018-2019 trade disputes for a historical guide. During that period, similar tariff announcements led to several sharp corrections in the NASDAQ of over 10%. This past performance suggests the current market weakness could persist longer than some expect.
The Federal Reserve’s September meeting is now the most critical upcoming event. Market data from Fed funds futures is currently pricing in an 85% chance of a quarter-point rate cut. Any guidance from the Fed that contradicts this strong expectation will almost certainly trigger another wave of volatility.
For those of us with existing long-term holdings in Amazon, this is a good time to hedge by selling covered calls. Choosing a strike price significantly above the current stock price allows us to collect premium income. This income can help offset recent paper losses while we navigate the current downturn.
