Heavy Overhead Call Open Interest Could Pressure Amgen, Inc. (AMGN)

06/25/2009 10:05 am EST


Elizabeth Harrow

Director of Digital Content, Schaeffer's Investment Research, Inc.

Call options are starting to gain popularity on Amgen, Inc. (AMGN). On Tuesday alone, traders on the International Securities Exchange (ISE) bought to open 4,673 calls on AMGN, compared to just 1,755 puts. The stock's single-day call/put volume ratio of 2.66 indicates that bullish option volume nearly tripled bearish volume.

AMGN price chartLikewise, the biotech stock's ten-day ISE call/put volume ratio of 2.08 suggests a strong bias toward calls in recent weeks. In the front-month series, call players have set their sights on the July 52.50 strike, which carries peak open interest of 21,113 contracts.

The focus on this out-of-the-money option is interesting, because AMGN has recently smacked into resistance from the $53 level. This formerly supportive region recently switched roles and has rejected the stock's advances on several occasions during recent months.

If call traders continue to add contracts at this heavily populated strike, options-related pressure could augment this level's ability to exert resistance.

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By Elizabeth Harrow of Schaeffer’s Trading Floor Blog


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