July 25th Options Now Available For Amgen (AMGN)

Analysis of Amgen (AMGN) options reveals potential strategies for investors seeking yield enhancement. Selling the $285 put offers a 3.74% return if it expires worthless, while a covered call strategy at the $290 strike could yield 4.74% if the stock is called away; both strategies carry approximately 32% implied volatility, compared to the stock's 26% trailing twelve-month volatility, suggesting potentially attractive risk-adjusted returns.

Analysis

The analysis of Amgen Inc. (AMGN), currently trading at $288.23 per share, highlights two specific options strategies for investors. Selling a put contract with a $285.00 strike price, at a bid of $10.65, presents an opportunity to acquire shares at an effective cost basis of $274.35 if assigned, a discount to the current market price. This out-of-the-money put has a 56% probability of expiring worthless, which would result in a 3.74% return on the cash commitment, equivalent to a 27.28% annualized YieldBoost. Alternatively, implementing a covered call strategy by selling a $290.00 strike call option, bid at $11.90, against shares purchased at $288.23, could yield a total return of 4.74% if the stock is called away by the July 25th expiration. Should this call option expire worthless, an event with a 50% probability, the investor keeps the shares and the premium, achieving a 4.13% YieldBoost (30.14% annualized). Significantly, the implied volatility for both these option contracts is approximately 32%, which is notably higher than Amgen's actual trailing twelve-month historical volatility of 26%, suggesting that option premiums may be relatively rich, potentially favoring option sellers.

Key Decisions for Investors

• Investors looking to purchase AMGN shares at a potential discount could consider selling the $285.00 strike put, aiming for an effective entry price of $274.35 or a 3.74% premium yield if the option expires unexercised.
• Existing AMGN shareholders or those initiating a new long position could evaluate selling the $290.00 strike covered call to generate income, potentially earning a 4.74% return if called away or a 4.13% premium if it expires worthless, while acknowledging the upside is capped at $290.00.
• The elevated implied volatility of approximately 32% compared to the 26% historical volatility suggests that current option selling strategies on AMGN may offer attractive premiums, though investors must weigh the associated risks such as share assignment or foregone upside.
• It is advisable to monitor AMGN's stock price movements relative to these strike prices, along with changes in implied volatility and the probability of expiration, particularly as the July 25th expiration date approaches.