Amgen, Inc. (AMGN) Option Bulls Eye Higher Highs

Amgen, Inc.'s post-earnings rally is being cheered by yesterday's call buyers

by

Published on Oct 28, 2014 at 10:39 AM
Updated on Apr 20, 2015 at 5:09 PM

Amgen, Inc. (NASDAQ:AMGN) hit a record high of $148.47 yesterday, prior to announcing earnings after the close. The strong price action lured plenty of options traders to the table, as volume more than doubled the expected single-session norm.

Most active was the biopharmaceutical firm's January 2015 155-strike call, where 1,870 contracts changed hands. More than 80% did so at the ask price, and open interest spiked overnight, indicating newly bought bullish bets. By purchasing the calls to open, the traders expected AMGN -- which settled at $148.20 on Monday -- to topple the strike by January 2015 options expiration.

As alluded to, the company reported earnings last night -- and the results were music to the ears of option bulls. In fact, AMGN has spiked nearly 5% to trade at $155.49, and earlier touched another all-time high of $155.80, after posting an earnings beat and upping its full-year outlook. The firm also announced a number of cost-cutting measures (including increased workforce reductions), as well as a stock buyback plan.

Not surprisingly, this news was met with applause on the Street, where AMGN received price-target hikes from no fewer than five brokerage firms. Most ambitious among them is Goldman Sachs, which upped its outlook by $10 to $175, to go along with its "buy" rating.

Returning once more to the January-dated options -- while they are currently at the money thanks to this morning's rally, the buyers need Amgen, Inc. (NASDAQ:AMGN) to climb even higher through options expiration. Based on the volume-weighted average price (VWAP) of $3.63, at-expiration breakeven for the calls is $158.63 (strike plus VWAP).


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