August 1st Options Now Available For Amgen (AMGN)

Analysis of Amgen (AMGN) options contracts reveals potential strategies for investors. Selling a $290 put offers a 3.05% return if it expires worthless, with a 58% probability of that outcome, effectively creating a YieldBoost. Conversely, a covered call strategy selling the $300 call yields 5.23% if the shares are called away, but carries a 54% chance of the contract expiring worthless, providing a 3.20% YieldBoost; implied volatility is 30% and 32% respectively, compared to the stock's 26% trailing twelve-month volatility.

Analysis

Amgen (AMGN), trading at $294.03 per share, offers specific options strategies for yield enhancement or strategic stock acquisition. Selling the $290.00 strike put contract, which has a current bid of $8.85, could result in an effective share purchase price of $281.15 if assigned, a discount to the current market price. Analytical data suggests a 58% probability that this out-of-the-money put expires worthless, which would generate a 3.05% return on the cash commitment, or an annualized YieldBoost of 22.28%. For investors holding AMGN shares, selling the $300.00 strike call option, with a current bid of $9.40, could yield a total return of 5.23% if the stock is called away by the August 1st expiration. There is a 54% assessed probability of this call expiring worthless, in which case the premium collected would represent a 3.20% YieldBoost, or 23.34% annualized. The implied volatility for the put (30%) and call (32%) contracts exceeds Amgen's actual trailing twelve-month volatility of 26%, indicating that option premiums are currently elevated relative to recent historical price movements.

Key Decisions for Investors

• Investors bullish on Amgen and willing to acquire shares at a discount to the current price could consider selling the $290 put, which offers an attractive effective entry point of $281.15 or a 3.05% income if the option expires worthless.
• Current Amgen shareholders seeking to generate additional income might evaluate selling the $300 covered call, which provides a potential 5.23% total return if called away by August 1st, while acknowledging the upside is capped at $300 plus the premium received.
• The higher implied volatility (30-32%) compared to historical volatility (26%) benefits option sellers through richer premiums, but investors should also note this may reflect expectations of increased price movement or uncertainty.
• Assess the probabilities of assignment for the put (approximately 42%) and the shares being called away for the covered call (approximately 46%) when considering these strategies, as these are significant possibilities.