Options Trading News

January 23, 2013  Wed 5:11 AM CT

Amgen reports earnings today, and some traders have already chalked up profits in the stock.

optionMONSTER's Heat Seeker system detected unusual activity in the February 80 calls, with buyers paying $2.91 to $2.97 early in the session. Long calls such as these lock in the price where investors can get buy stock, so they can generate big profits on a percentage basis in the event of a rally. (See our Education section)

And that's exactly what happened yesterday in AMGN. The biotech giant started climbing shortly after the options traded, and those calls ended the session worth $4.10--a gain of more than 35 percent. The stock rose less than 2 percent in the intervening hours, which illustrates the kind of leverage that options can provide.

AMGN, which was down slightly when the trades occurred, closed the session up 1.47 percent to $83.29. The stock fell on Jan. 8 after the company had cut its guidance because of a tax credit, but management remained sanguine over the longer term. That could be leading some investors to expect a positive report this afternoon.

Total option volume in the name was almost 9 times greater than average in the session.

(A version of this post appeared on InsideOptions Pro yesterday.)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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