Sold Amgen (AMGN) at 54.36, and bought Amgen Jan '08 $40 LEAPS (AMQAH) at $16.20 while increasing exposure by 50%. In other words, I bought 50% more contracts than would have been required to match my original position.
Anyway, I paid roughly $1.85 in premium. The option delta was roughly 0.9, which means that for the time being, I should be expecting a move of 90 cents for every dollar that AMGN moves. This delta will fluctuate, but if AMGN goes significantly higher, the delta should approach 1.0.
Amgen has really been hit hard recently by a string of setbacks. I do like the company long-term, but I didn't want to pump more money into the issue. So, after some thought I figured to pull money out and increase exposure. Of course, if Amgen were to fall hard from this point on, I lose at a much faster rate. But, that's a chance I was willing to take.
I'll be leaving AMGN in the Long-Term Portfolio list on the right, since I am fairly certain that come January, I will end up exercising the LEAPS and get back into an equity position.
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