As a part owner of Amgen and nephew to a breast cancer sufferer I was happy to read Denosumab demonstrated superiority over Zometa. As an option seller it sent a shiver down my spine.

During the early naughties I was a big, at least in my little world, Amgen call seller. I generally sold LEAP options and no doubt my broker thought I was insane selling naked calls. Little did they know that the calls were backed up by my partners employee options and that I was just locking in a sale price and getting paid a large deposit on something I couldn’t sell anyway. But that’s a story for another time. We still own a few Amgen shares, but I haven’t sold any Amgen calls since my disastrous bull spread of ‘08, which is yet another story I should relate. The takeaway was, take your profit and run. Which bring me nicely around to the point I wanted to make.

It was just over a day ago that I wrote about closing out my Vertex call after I had gained 2/3 of the sale price. The main reason to close an option early is to get out of harms way. When you sell options you’re in the hot seat and you should get out as fast as you can. For some strange reason I like warming my arse and tend to stay in positions too long. Call me lazy if you wish. Imagine how short option sellers in Amgen feel today? I need to keep that in mind more often when I’m in the hot seat. Though upside pain is seldom as bad as downside. [Volatility skew]

Amgen Rises After Denosumab Bests Zometa in Study

By Lisa Rapaport

July 8 (Bloomberg) — Amgen Inc. rose the most in four years in New York trading after the company reported its lead experimental product, a bone strengthening medicine, worked better than a potential rival in a study.

Shares of Thousand Oaks, California-based Amgen surged $8.16, or 16 percent, to $60.39 at 9:44 a.m. in Nasdaq Stock Market composite trading. Earlier the shares reached $60.95, the most since July 20, 2005, a day after the company reported a 38 percent jump in quarterly profit. Study results for the drug, called denosumab, were announced yesterday after the market closed.

Denosumab did a better job in the clinical trial than Novartis AG’s Zometa delaying fractures and other complications in breast cancer patients whose illness had spread to their bones, Amgen said yesterday. Analysts raised peak annual revenue projections for the drug and price expectations for Amgen stock.

“Superior efficacy could enable denosumab to establish a new standard of care,” said Ian Somaiya, an analyst with Thomas Weisel Partners LLC in New York, in a note to clients today.

Somaiya increased his target price for Amgen shares to $71 from $62 today.

The study results will allow Amgen to sell denosumab at the same price as Zometa, instead of at the 20 percent discount Somaiya said he had previously anticipated. He raised his revenue projection for denosumab to $2.1 billion in 2012, from a previous forecast of $1.8 billion.

via Amgen Rises After Denosumab Bests Zometa in Study (Update2) – Bloomberg.com.

Related posts:

1. LEAPS and Option Cycles
2. Day Seven: Ten of the Biggest Mistakes in Option Trading
3. Day Two: Ten of the Biggest Mistakes in Option Trading
4. Day Five: Ten of the Biggest Mistakes in Option Trading
5. Day Nine: Ten of the Biggest Mistakes in Option Trading
6. Day Six Part 2: Ten of the Biggest Mistakes in Option Trading