What is a covered call strategy?

An options strategy where the investor owns the stock and sells a call option, receiving a premium in exchange for agreeing to sell at a set price.

What is the expected yield from the covered call on Amgen?

The estimated annual yield is 8.7% from the option premium.

What are the main risks of this strategy?

The biggest risk is capping gains if the stock rises sharply, plus the risk of the stock falling.

Do I need to own Amgen shares to use this strategy?

Yes, you must own 100 shares of AMGN for each option contract you sell.

Make Your AMGN Shares Pay You 8.7% While You Hold Them

A covered call strategy on Amgen (AMGN) shares can yield a guaranteed 8.7% annual return while retaining the shares. Understand how it works and the risks involved.

According to an analysis by Trefis, holders of Amgen (AMGN) shares can generate a guaranteed 8.7% return through a covered call strategy. This options strategy allows investors to keep their shares while earning immediate income from the option premium.

What is a Covered Call?

A covered call is an options strategy where the investor owns the underlying stock (AMGN) and sells a call option on the same stock. The investor receives a premium upfront in exchange for agreeing to sell the stock at a specified price (strike price) if the stock rises above it.

Strategy Details

Stock: Amgen (AMGN)
Estimated Annual Yield: 8.7% from option premium
Condition: Hold the stock throughout the option period
Risk: If AMGN rises above the strike price, the investor must sell at that price, capping upside gains.

Advantages

Immediate Income: Premium received in cash upon selling the call.
Keep the Stock: Ownership retained unless option is exercised.
High Yield: 8.7% guaranteed vs. ~3% dividend yield.

Risks and Considerations

Limited Upside: If AMGN surges, gains are capped.
Market Risk: If AMGN falls, capital loss possible.
Liquidity: Desired strike prices may not always be available.

What This Means for Investors

The covered call strategy suits investors expecting stable or slightly higher AMGN prices who want extra income. It is not ideal for those expecting big gains or long-term holders unwilling to risk forced sale.