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LivestreamMenuAmazon silenced the recent AI CapEx panic as CEO Andy Jassy provided granular details on the spend-to-revenue relationship with a clear “line of sight” to guaranteed returns through 2028. With shares ripping higher, implied volatility remains elevated from the recent tech flush. I want to use options in AMZN to express my bullish view and define risk, capitalizing on the lingering fear premiums connected to AI CapEx spending fears. Amazon just delivered an amazing Q2 2026 earnings report that completely quells recent “CapEx additional spend” anxiety and possibly shifts the entire narrative on AI infrastructure spending for all hyperscalers. While the broader tech sector has been aggressively selling off over fears of the AI arms race “overspend” coupled with injected volatility from the collapse of the Situational Awareness Hedge Fund managed by Leopold Aschbrunner, Amazon stepped up and provided the exact validation Wall Street desperately needed to hear. Revenue vaulted over $200 billion (for the first time ever), representing a 20% increase year-over-year. Furthermore, operating income surged 43% to $27.5 billion, proving that profit growth is vastly outpacing sales growth. CEO Andy Jassy’s defense of their massive capital cycle again defends the jaw-dropping CapEx spend. Like Google and others, AMZN officially raised their full-year 2026 cash capital expenditure guidance to approximately $220 billion, with the vast majority allocated directly to AI and cloud infrastructure. However, unlike competitors who are spending on the hope that demand materializes, Jassy made it clear they have a clear “line of sight” to guaranteed returns. AWS revenue surged 36.7% year over year, marking its fastest pace of growth in 18 quarters. AWS is now officially operating at a staggering $169 billion annualized revenue run rate. The extreme cash flow generation and margin expansion currently shielding Amazon’s CapEx speaks volumes into how this company is dominating the AI transition. The demand for AI and core cloud workloads is so ferocious that Amazon literally cannot install capacity fast enough to meet it. This isn’t speculative spending; it is monetizing an existing, massive enterprise backlog. Trade: bullish risk reversal After oscillating around $230 all of 2026 and still being down roughly 5% from all-time highs, Amazon seems poised to move higher. Seeking to capitalize on elevated downside premiums and position for a violent continuation of this earnings surge, this risk reversal seeks to finance upside exposure by selling an out-of-the-money put. Sold the AMZN 10/21/2026 $245 put for $1.75 Bought the AMZN 10/21/2026 $280 call for $4.00 This spread will cost an investor $2.25 ($225 per one-lot spread) to initiate this position. AMZN was chopping around $267 when executed. I am using that premium to heavily subsidize the $280 call, cutting my entry cost down to just $2.25. As long as AMZN catches a fundamental tailwind and surges back to fresh all-time highs above $282.25 at expiration, this trade offers uncapped upside participation. Investors must be prepared to own AMZN at $245 which would be roughly 7.5% lower from today’s opening prices. DISCLOSURES: Kilburg executed this risk reversal and currently holds a position in AMZN in both of his ETFs that he manages: Essential 40 ETF (ESN) & Mango Growth ETF (GARY). All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.Read More
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