Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Minyan Mailbag: Amgen Volatility


Have you noticed the persistent decline in AMGN's share price (down 10 days in a row and down 12 out of the last 13 days) along with the sharp increase in implied volatility in its options?

The IV started to move higher before AMGN's share price moved lower (in fact, the share price went a little higher while the IV started to move higher). Although I'm not certain, I would think that makes the move in IV less important (I would feel more comfortable "betting" on the downside if the IV jumped while the stock began its move lower).

This move in IV is large, even when taking into account the fact that AMGN has an upcoming earnings announcement. Perhaps people are expecting another big move like AMGN had with their last EPS announcement.

I would like to see how it performs now that all of those analysts came out and defended the stock yesterday.

Ryan Orlando

Amgen may be a good company, but its stock price is "rich" at 25 times earnings.

We love the combination of very cheap options and high valuation in a stock price to buy volatility. We may make nothing, but the odds are good that the high valuation means too many people are crammed into a stock. When good things happen they cram into it more and outsize their risk; when bad things happen they can defend all they want, but they usually finally turn sellers. That can be interesting.

Trading volatility profitably involves not only identifying good positions, but also in properly re-hedging. Once a stock begins to move, it takes a while and lots of consternation for it to slow back down.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos