AMGN Analysis

Amgen Inc. (AMGN)

Update 11/1/2018: I’ve exited AMGN for a profit, 15 days before the options expired. The exit came at 14.9% of maximum potential profit, lower than my normal 25%. My purpose was to free up funds for another purchase. 

I exited for a debit of $8.32, a $148 profit per contract, with the share price at $192.89, up $2.97 from entry.

Shares rose by 1.6% over my two-day holding period, or a +295% annual rate. The options position produced a 17.6% return for a +3,203% annual rate.

I have entered a short iron fly spread on AMGN, using options that trade for the last time 17 days hence, on Nov. 16. The premium is a $9.78 credit and the stock at the time of entry was priced at $189.92.

The position is timed to coincide with an earnings announcement, on Tuesday, Oct. 30, after the closing bell.

The profit zone for this position is between $199.78 on the upside and $184.78 on the downside.

Implied volatility stands at 36%, which is 1.5 times the VIX, a measure of the volatility of the S&P 500 index.

AMGN’s IV stands higher than 89% of its daily readings over the past year.

The price used for analysis was $190.29.

Premium: $9.78 Expire OTM
AMGN-iron fly Strike Odds Delta
Long 205.00 85.6% 16
Break-even 199.78 68.9% 34
Short 190.00 52.2% 51
Short 190.00 47.7% 49
Break-even 184.78 63.1% 34
Long 175.00 78.4% 19

The premium is 65.2% of the width of the position’s wings.

The risk/reward ratio is 0.5:1, with maximum potential loss of $522 per contract and maximum potential gain of $978 per contract.

The bid/ask spread was 4.1%.

By Tim Bovee, Portland, Oregon, Oct. 30, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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