Amgen (AMGN) 11/20/09 PriceWatch Alert At $54.05 Break Even

Posted: Friday, November 20, 2009 8:07 AM EDT

Amgen (NasdaqNM: AMGN) closed yesterday at $56.06. So far the stock has hit a 52-week low of $44.96 and 52-week high of $64.76. Amgen stock has been showing support around 55.19 and resistance in the 56.67 range. Technical indicators for the stock are Bearish and S&P gives AMGN a positive 4 STAR (out of 5) buy rating. AMGN appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 62.50 covered call (YAA DZ) for a net debit in the $54.05 area. That is also the break even stock price for this trade. This covered call has a 148 day duration, provides 3.59% downside protection and a 15.63% assigned return rate for a 38.56% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the AMGN Jan '11 45 Call (VAM AI) and selling the Apr '10 62.50 call (YAA DZ) for a $12.39 debit. The trade has a 148 day life and would provide no downside protection and a 41.24% assigned return rate for a 102.00% annualized return rate (for comparison purposes only). Amgen does not pay dividends at this time. [FBB-Seven Summits Research]

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