Unusual Options Activity: Eli Lilly and Company (LLY)

Eli Lilly and Company (LLY)

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  • Traders bet on company heading higher.

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  • The February 2020 $135 call options on Eli Lilly and Company (LLY) saw a 20-fold rise in volume, going from 164 open contracts to over 3,380 trade hands.

    With 64 days to go until expiration and with shares trading around $128.50, the option will move in-the-money with a 5 percent rally in shares.

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    Given the option price around $1.95, the option buyer stands to profit at expiration if shares hit $137 or higher.

    The option trade comes as the company reports earnings, with an upbeat note on sales and its profit outlook for 2020, further bolstering the case for a modest 5 percent rally in the next few weeks.

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  • Action to take: We like this trade, even if it is a little short-term in nature. Sentiment in the industry as a whole has been weak for a long time, creating a solid buying opportunity. And the company’s rising sales and upbeat forecasts show that things are going fine operationally.

    Besides the February call options, share look attractive here. They’re only up 17 percent in the past year, underperforming the overall stock market by about 8 percent. And with profit margins over 30 percent on the drugs they sell, the company is in a great place for investors. Shares yield 2.4 percent at today’s prices, making the stock a buy up to $130.00.