Amgen (AMGN)
Amgen (AMGN)
Amgen (AMGN) is due to announce earnings today after the closing bell.
The stock is currently trading for 320.
- IV Rank: 73.5
- IV: 40.3%
Expected Move for the February 16, 2024, Expiration Cycle: 304 to 336
Knowing the expected range, I want to place the short call strike and short put strike of my iron condor outside of the expected range, in this case outside of 304 to 336.
If we look at the call side of AMGN for the February 16, 2024, expiration, we can see that selling the 345 call strike offers an 88.92% probability of success. The 345 call strike sits just above the expected move, or 336.
Now let us move to the put side. Same process as the call side. But now we want to find a suitable strike below the low side of our expected move, or 304. The 290 put, with a 90.27% probability of success, works.
We can create a trade with a nice probability of success if AMGN stays within the 55-point range, or between the 345 call strike and the 290 put strike. Our probability of success on the trade is 88.92% on the upside and 90.27% on the downside.
Moreover, we have a 7.8% cushion to the upside and a 7.8% margin of error to the downside.
If we look at the earnings reactions since 4/17/1996, we can see that there have been only a few breaches of 5% to the upside or downside after an earnings announcement. That being said, we have seen some decent moves, so, as always, make sure your position size is at reasonable levels.
Net Change – At the Opening Bell
Full Bar – Price Movement Throughout the Day
If one wanted to make a trade, below are the potential strikes that make the most sense or are at least a starting point for a trade.
Here is my trade:
Simultaneously:
Sell to open AMGN February 16, 2024, 345 calls
Buy to open AMGN February 16, 2024, 350 calls
Sell to open AMGN February 16, 2024, 290 puts
Buy to open AMGN February 16, 2024, 285 puts for roughly $0.61 or $61 per iron condor (adjust accordingly, prices may vary from time of alert).
Our margin requirement would be roughly $439 per iron condor. Again, the goal of selling the AMGN iron condor is to have the underlying stock stay below the 345 call strike and above the 290 put strike immediately after AMGN earnings are announced.
Here are the parameters for this trade:
- The probability of success – 88.92% (call side) and 90.27% (put side)
- The maximum return on the trade is the credit of $0.61, or $61 per iron condor
- Max return: 13.9% (based on $439 margin per iron condor)
- Break-even level: 345.61 – 289.39.
As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
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