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  • Insiders Consistently Sell AMZN Shares And Rarely Purchase Shares 2 comments
    Mar 21, 2013 2:25 PM | about stocks: AMZN

    There are plenty of posts about the valuation of Amazon (NASDAQ:AMZN), many arguing the stock is tremendously overvalued and poised to collapse, and many defending the lofty valuation on the belief that future growth justifies the exorbitant multiples. I have often used insider buying and selling as a validation before acting on stock ideas, so I consulted the insider trading history of AMZN to see if insider sentiment would be an indicator as to which argument is right. The result is unequivocal: insiders have not demonstrated much faith in the company's stock.

    The last open market insider purchase of AMZN was by Jonathan Rubinstein, a director, who bought 68 shares at $177.23 for $12,052 back in January 2012. Since then insiders have sold 1,243,674 shares for $310,399,460. Looking back further, it seems this is not just a recent phenomenon. Since May 26, 2004, insiders have purchased shares of Amazon on the open market only 5 times, investing a total of $264,388 of their own money. Over the same period, insiders sold shares 886 times, netting $2,292,189,262 - over two Billion dollars worth of stock! That's a ratio of 8700:1 in dollar value of sales to purchases.

    One can argue that insider selling is not an indicator that the stock will decline. After all, during this period of heavy insider selling, the price of AMZN shares has steadily increased. Regardless, I like to see insiders showing confidence in their company before I put my own money at risk. Insiders sell for lots of reasons, but they buy shares for one reason only, and that's to make money and in the belief that the shares are going to provide a healthy return on their investment. Clearly, Amazon insiders have not demonstrated such faith in the shares of their company.

    The source of my information on insider trading was

    Disclosure: I am short AMZN.

    Additional disclosure: I am long AMZN put options with strike $420.00 and expiration January 2015.

    Stocks: AMZN
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  • Renmycat!
    , contributor
    Comments (938) | Send Message
    put options at $420? or did you mean $240? thanks
    22 Mar 2013, 12:14 PM Reply Like
  • coastside1000
    , contributor
    Comments (119) | Send Message
    Author’s reply » Thanks for asking. Actually I mean $420. On March 7, 2013 I bought 1 LEAP put option expiring 1/17/15 with strike $420 at a price of $154.90 for -$15,499.71. The position is now worth $16,725. It's equivalent to selling 100 shares of AMZN short and buying a cheap long term call at $420. The downside is limited to my investment in the option, whereas with a straight short position the potential loss is theoretically unlimited. The most I can gain would be if Amazon were to become worthless, in which case I gain $26,500.
    22 Mar 2013, 02:44 PM Reply Like
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