How to buy, sell and short Amazon shares
Thinking of trading Amazon shares? We go through the basics of the company, and explain how to analyse Amazon and how to buy, sell and short Amazon shares.
How to buy or invest in Amazon shares
You can buy Amazon shares from zero commission with us. You can do this by either investing in the shares directly or by derivatives trading. Investing directly – via a share dealing platform – means you take ownership of Amazon stock, and you can profit if the shares increase in value or by receiving dividend payments.
Trading derivatives – such as CFDs and spread bets – means you can speculate on the price movements of Amazon shares without taking ownership of them. This enables you to trade with leverage, which grants you full market exposure when you put down a small deposit, known as margin.
Follow the steps below to invest in or trade Amazon shares:
Investing in Amazon shares
- Create or log in to your IG share dealing account
- Search for ‘Amazon’ (AMZN)
- Choose ‘buy’ in the deal ticket
- Select the number of shares you want to buy
- Confirm your purchase and monitor your investment
Trading Amazon shares
- Create or log in to your IG trading account
- Decide whether you want to trade CFDs or spread bets
- Search for ‘Amazon’
- Choose your position size and select 'buy'
- Confirm your trade and monitor your position
How much would it cost to invest in Amazon?
|FX conversion fee||US best commission||US standard commission|
IG’s best commission on US shares is available to clients who opened three or more trades in the previous calendar month. If you’d rather speculate on the value of Amazon with financial derivatives, you can do so with CFDs and spread bets . You’ll be able to:
- Get full exposure with a small deposit – usually just 20-25% of the full value of the trade1
- Trade spread bets without paying any tax2
- Offset your losses against profits for tax purposes with CFDs
How to sell or short Amazon shares
After investing in Amazon, you might want to sell your stake if the price starts to fall. Equally, you might want to short Amazon shares by trading with CFDs or spread bets, and profit from the price falling.
Follow the steps below to either sell or short Amazon shares:
Selling Amazon shares
- Log in to your IG share dealing account
- Search for ‘Amazon’ in your positions
- Select ‘sell’ in the deal ticket to close your investment
- Enter the number of shares you want to sell
- Confirm the sale
Shorting Amazon shares
- Create or log in to your IG trading account
- Search for ‘Amazon’
- Decide on your position size
- Choose ‘sell’ in the deal ticket to speculate on the price falling
- Confirm the trade and monitor your position
Amazon’s live market prices
How to trade Amazon options
IG also offers Amazon options, which you can trade by following the steps below:
- Research the market
- Open an IG trading account (spread betting or CFDs)
- Navigate to 'Options' and select either weekly or monthly Amazon options
- Decide whether you want to buy or sell a put or call
- Confirm your trade over the phone
CFD trading Amazon shares
A CFD is a contract in which you agree to exchange the difference in price of Amazon shares from when you open your position to when you close it. You can buy CFDs to go long or sell them to go short.
Spread betting on Amazon shares
When you trade Amazon shares via spread betting, you are placing a bet on whether its price is headed up or down. As Amazon moves in your chosen direction, you earn profit. If it moves against you, you make loss.
Amazon shares: the basics
Amazon went public in 1997 at $18 per share to give it an initial valuation of $300 million. Amazon shares are traded on the Nasdaq under the ticker ‘AMZN’. The company is a member of a number of indices including the Nasdaq Composite, the Nasdaq 100, the S&P 500 and the S&P 100.
Understanding Amazon: a brief history
Amazon was founded as an online bookstore in 1994 but it soon diversified into new areas such as music and launched its core third-party selling site. Although ecommerce sales still drive most of Amazon’s net sales, this has fallen over recent years after the company expanded into several new areas.
Meanwhile, Amazon has grown income from new revenue streams including its acquisition of Whole Foods and an entry into the US pharmacy market, its media subscription services through Prime, its cloud computing division Amazon Web Services (AWS) and its online advertising business.
Amazon’s online ecommerce platform is at the heart of the business and now sells a wide variety of products around the world. Although the company sells large amounts of its own products like Alexa smart speakers or Fire tablets, it is increasingly selling a larger proportion of goods from third-party sellers, often small- and medium-sized businesses that use the platform to reach a wider audience at a lower cost.
Believe it or not, Amazon is still a small player in the global retail market and that is predominantly because almost 90% of all retail sales still occur offline, according to Amazon. This has pushed it into brick-and-mortar stores over recent years when most retailers have been building their digital strategies.
Amazon Web Services (AWS) is a hugely important element of Amazon. The cloud-computing division provides other businesses with the IT services they need to work in the digital age and although the unit only accounts for 11% of total net sales it was the single-biggest driver of operating profit in 2018, generating slightly more than the ecommerce unit.
According to data from canalys, AWS is by far the largest cloud service provider in the world with almost one-third of the total market, double that of its closest competitor Microsoft Azure, which holds 16.5% of the market. Annual sales growth last year was impressive at over 46% but that was slower than Microsoft, Alphabet's Google Cloud and Alibaba Cloud.
Amazon Prime is the company’s core subscription service that allows customers to benefit from better delivery options and access to its other offerings, including its digital entertainment arm that takes on the likes of Netflix. It also has other separate subscriptions available such as its audiobook service Audible.
Amazon does not report the number of subscribers it has on a regular basis but it was widely reported that it surpassed 100 million members in the US alone at the start of 2019, having soared from around 40 million at the start of 2015, according to Statista. The value of annual purchases by Prime subscribers in the US is more than double that of non-Prime members.
Amazon’s online advertising business has attracted a lot of attention in recent years. The company’s many tentacles gives it an almighty platform to push advertisements or suggest products to consumers and net sales in 2018 were five times greater than in 2016, now comfortably over $10 billion per year.
Although Google remains the leader in this space because of its monopoly over internet search, Amazon has found an edge with an increasing number of product searches originating on its own site and bypassing search engines. Its other main rivals in advertising are the social media companies that attract marketing dollars from industry, particularly Facebook.
What is Amazon’s strategy?
Amazon continues to move into new areas and diversify as a business and although the company operates in several very different areas they are all separate cogs of one big machine.
It leverages strengths in one part of the business to aide another, such as building a store network to compliment the growing amount of click and collect being ordered online or enticing more people to subscribe to Prime with its entertainment services, which should help boost online sales.
This is defined as a ‘flywheel effect’ where each part of the business helps propel growth in another in what appears to be an endless cycle of growth.
It may be relying less on sales from its core online ecommerce platform but be under no illusion that its importance is waning. For example, its newer and fast-growing advertising business relies on the fact it has so many people using its ecommerce platform, as does its subscription services. In tandem with the full frontal attack on serving consumers in new ways it has also started to capture businesses by supplying cloud computing services through AWS.
The number and value of acquisitions made by Amazon has increased over the last two years, with Whole Foods being the most notable at $13.7 billion. Still, most of its recent acquisitions have been very early stage companies that have raised little money so far. Amazon is one of the most-cited threats in the world of business and touted as a possible new entrant in many major new markets.
While Amazon is delivering strong double digit growth across all areas of its business shareholders are primarily focused on the newer areas of the business like online advertising and where AWS goes with artificial intelligence (AI) – Amazon has made a big push with its Alexa voice assistant, for example, and happily sold as many smart speakers and other Amazon devices at a loss to ensure it penetrates as much of the AI-voice assistant market as possible.
Amazon dividend: what’s the outlook?
Amazon does not pay a dividend and never has because it has chosen to fuel its ongoing and aggressive expansion by reinvesting profits back into the business. Although this pushes the stock off the radar of many income investors the stock has seen its share price appreciate enough to provide a decent return, having outperformed the likes of the S&P 500 over the last four years.
Amazon does have the resources to pay a dividend but it has not given any formal indication as to when investors could see a payout. Many believe the company will only pay one if it can dish out a significant sum and is confident it is sustainable and can be maintained over the long term. While Amazon has grown into a market leader in several different industries it still has a lot of competition from formidable and financially-sound rivals. The acquisition of Whole Foods demonstrates why the company has decided to hold-on to cash rather than give it back to shareholders.
How to analyse Amazon
While a company with so many arms needs thorough analysis by those that are thinking about investing there are three key financial metrics for investors to watch out for every quarter:
Net sales growth: The key figure for Amazon, considering it is still in growth mode, is progress at the top-line. Total net sales growth has accelerated for four consecutive years but there are signs that this is slowing. Investors also need to track the progress of individual business units, such as the rate of growth being delivered by its lower-margin commerce business or that of its higher-margin services unit. The performance of AWS and its online advertising units are being watched particularly by investors at present. Amazon provides quarterly financial guidance for net sales to give investors a benchmark when results are released.
Operating profit: Amazon provides financial guidance for quarterly operating profit so it is a key measure to track how well the business has performed compared to its profit targets.
Net income: Amazon’s preferred bottom-line measure is net income, which is also used to calculate the diluted EPS figure. This figure is ultimately used to evaluate its profit performance.
1 Deposits for leveraged trades are 20-25% on 99.77% of tier one US shares.
2 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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