While everyone recognizes that e-commerce giant Amazon (AMZN) is a powerhouse enterprise, it’s also fair to point out that it hasn’t exactly performed as a stellar growth play. Since the start of the year, AMZN stock has only gained 6%. That’s relatively poor when compared with the benchmark S&P 500 (SPX) index, which is up nearly 20% in 2025. However, it’s possible that the pensive price action could inspire a bullish comeback.
Claim 70% Off TipRanks This Holiday Season
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential
Essentially, I’m referencing a concept known as reflexivity. In colloquial terms, investors generally accept that stock market prices reflect underlying fundamentals, especially for industry stalwarts such as Amazon. On occasion, however, securities can be severely divorced from their perceived intrinsic value. Thanks to a positive feedback loop, investor beliefs can sometimes shape reality.
For securities that are thought to be undervalued, like AMZN stock, reflexivity can lead to outsized gains. However, it’s important not to trade on mere assumptions of reflexivity but rather on hard data.
My proposal is that through practical mathematical methodologies, we can analyze and predict the influence of reflexive market behaviors, specifically for AMZN stock options. Ultimately, there may be a unique bullish opportunity that could be in store for daring speculators.
Throwing Out What Doesn’t Work and Concentrating on What Does
When trading options, the first instinct among market participants is to examine price charts and conduct technical analysis. However, the technical approach is rather limited because the underlying methodology does not natively allow for the identification of a sentiment regime. In fairness, the other approaches — such as fundamental and quantitative analysis — fail to account for regime states as well.
Over an extended period of time, it’s almost inevitable that a security goes through multiple shifts in behavioral states. We’re not just talking about bullish and bearish cycles; rather, there are different magnitudes of cycles, much like there are different types of earthquakes.
I live in California, so I’m familiar with earthquakes. Some are minor—just enough to make you pause and take notice—while others are powerful enough to be genuinely unsettling. The point is that we rely on the Richter scale to quantify the movement of tectonic plates, giving us a consistent frame of reference. When we hear about a 6.5-magnitude earthquake somewhere in the world, that number immediately conveys the severity of the event.
Returning to the market, we observe fluctuations in AMZN stock over the past several years and infer that it is undergoing multiple sentiment regimes, each influencing the security. It’s the analyst’s job to identify the sentiment regime and provide a forecast of the stock’s direction based on that information.
When we look at a typical analysis, we just see the target security move from left to right on a chart. Therefore, without explicit commentary from the author stating otherwise, we are left with no other conclusion other than to assume that we’re looking at one continuous sentiment regime.
Mathematically, the problem is that share prices are theoretically unbounded. They could go to infinity, which is not a quantifiable concept. Fortunately, we can compress price action into up or down sessions, thereby artificially creating consistency in the dataset.
In other words, an up session from 2019 belongs in the same category as an up session in 2025. With this homogeneity in place, we can now graduate from horizontal-scrolling analyses to hierarchical frameworks.
Calculating the Risk Geometry of AMZN Stock
Typically, options trading involves betting on a security’s near-term performance. With that in mind, we need to analyze the behavioral tendencies of AMZN stock across multiple trials. If we took a single 10-week strand of AMZN stock price data, the return during this period wouldn’t tell us anything about the performance probability of the other weeks in the dataset.
However, if we stacked hundreds of rolling 10-week sequences onto a fixed-time distribution, the most frequent behaviors would lead to bulges in probability mass.
These bulges represent risk geometry, which, in part, reflects the ascendancy of bullish sentiment among buyers. More importantly, risk geometry also shows where buyers are tempted to become sellers. Thus, this metric gives us insight into where we can push — and where we should back off.
In Amazon’s case, its forward 10-week returns would typically range between $229 and $246, with price clustering likely to be predominant at $238 (assuming an anchor price of $232.52, Friday’s close). However, the current quantitative signal is the 4-6-U sequence. In the past 10 weeks, AMZN stock printed only four up weeks, but with an overall positive slope.
Under this contrarian signal, Amazon’s forward 10-week returns would typically range between $225 and $250, with primary clustering likely to materialize around $234. However, secondary clustering may occur at $241. It’s this secondary coalescing of activity that I believe is worth speculating on.
Risk Topography Provides Further Clues
According to my proprietary analysis and framework called “risk topography,” which effectively views the demand structure of public security in a three-dimensional probability space, AMZN is currently in a bullish setup. From this perspective, you can see that while there’s peak activity projected to land near $234, there’s also significant activity projected to materialize at around $240.
If we were to target a lower strike price in a capped-risk, capped-reward transaction, we may incur an opportunity cost if AMZN stock does fly higher. To prevent this outcome, I believe it’s worth considering targeting the 235/240 bull call spread expiring Feb. 20, 2026.
This trade requires AMZN stock to rise through the $240 strike at expiration, which should be a reasonably realistic target given the aforementioned probabilistic data. Further, the breakeven price for this call spread lands at $237.30, which splits the risk topography down the center (between the two peak clusters).
As a bonus, there’s not much activity projected beyond $240. Therefore, this strike price represents a theoretically optimal demarcation for a debit spread, as we’re less likely to incur opportunity cost.
Is AMZN Stock a Buy, Hold, or Sell?
Turning to Wall Street, AMZN stock has a Strong Buy consensus rating based on 44 Buy, one Hold, and zero Sell ratings, obtained over the past three months. The average AMZN price target is $296.12, implying 27.5% upside potential in 2026.
Opening a New Framework for AMZN Stock
Invariably, the options market is a complex beast and therefore requires complex methodologies to facilitate consistent success. Through analyzing risk geometry in three-dimensional space, we can see that under the current quant signal, AMZN stock is likely to see heightened activity around the $240 price point over the next 10 weeks. As such, targeting the 235/240 bull spread could make sense for daring speculators.