Optimism is on the rise toward pharmaceutical giant Eli Lilly & Co. (LLY: sentiment, chart, options). Options players have shown a growing preference for calls on the stock, pushing its Schaeffer's put/call open interest ratio (SOIR) lower, from 0.71 on March 13 to its current perch of 0.65. During this time frame, call open interest among options slated to expire in less than 3 months increased by 3.7%, while put open interest decreased by 5.2%.
What's more, the SOIR is in the 37th percentile, indicating that short-term options speculators have been more optimistically aligned toward the security just 37% of the time during the past year.
Digging into the stock's open interest configuration, we find that peak front-month call open interest sits at the 40 strike, with more than 4,700 contracts, while the March 35 call has open interest of 4,100 contracts. In the April series, peak put open interest sits at the 35 strike, with a whopping 11,800 contracts.
On the other hand, peak March put open interest sits at the 32.50 strike, with only 4,200 contracts. Peak April call open interest sits at the 35 strike, with only 8,500 contracts. This preference for short-term calls shows that investors have high hopes for the shares.
Elsewhere, we find that Wall Street is growing more optimistic about LLY's prospects. This morning, Citigroup upgraded Eli Lilly to "buy" from "hold" and said it expects U.S. health regulators to approve the company's new blood thinner, Effient, in the first half of 2009.
Analyst John Boris said the label negotiations for Effient are tipped in Lilly's favor, following unanimous backing from a U.S. panel in February. "We expect the label to be broad in scope, with the lower dose (5mg) approved to manage high risk patients," Boris said in his note. He also added, "We expect any cancer risk to be mentioned in the label, but don't expect a warning or Black Box warning limiting length of therapy."
There is still ample room for additional upgrades, as the stock has earned 2 "strong buy" ratings, 9 "holds," and 1 "strong sell." Any additional upgrades could help boost the shares.
Technically speaking, the stock is trading more than 1% higher this afternoon on the positive broker comments, but is still down more than 20% since the start of 2009. The equity recently bounced off its March 5 low of $27.21, and climbed above its 10-day and 20-day moving averages for a gain of more than 17%. However, the stock is battling short-term resistance at the 33 level -- an area that capped the shares at the end of February.
LLY must also take out additional resistance at its declining 10-month moving average near the 39 level. LLY has not closed a month above this trendline since October 2007.
Overall, any additional upgrades from Wall Street could help to push the shares higher during the near term. Traders should be wary of long-term resistance at the 39 level, as a rejection here could shake loose some of the bullish options traders.
A bull? A bear? Conservative? Aggressive? No matter what kind of investor you are, option trading offers you tools to enhance and protect your portfolio. Learn how from Bernie Schaeffer, the highly respected equities and option market veteran. Bernie's home study course will show you how to leverage relatively small amounts of capital into big profits -- in just 10 days. Includes CD, DVD, and other extras. Click here to learn more.
Discuss this article:
Post your own comment
More articles:
Option traders are betting on a continued slump for casino concern Bally Technologies Inc. (BYI: sentiment, chart, options) , despite an upbeat analyst endorsement over the weekend. read more...
Aetna Inc. (AET) read more...
Research In Motion Limited (RIMM: sentiment, chart, options) has attracted an unusual amount of attention from option traders today – especially on the put side of the tape. In early afternoon activity, the BlackBerry maker has seen roughly 17,000 puts change hands, already surpassing the stock's expected single-session volume of about 15,000 puts. read more...
Earnings season is upon us, and investors all across Wall Street are hoping to take advantage of these potentially volatile few weeks. Large bull (and bear) gaps, upgrades and downgrades, and short squeezes all become increasingly more likely during this period, as companies meet, beat, or miss quarterly expectations. As such, it is imperative that traders be well equipped to deal with all of the eventualities. read more...
NRG Energy (NRG) read more...
Bullish call spreads are known by a variety of different names among options traders. But whether the position is a bull call spread, bullish debit spread, or a long vertical call spread, it is still constructed by purchasing an at-the-money or in-the-money call while simultaneously selling an out-of-the-money call. The reasoning behind pairing up these seemingly contradictory options is really quite simple: limited risk. read more...
McDonald's Corp. (MCD) read more...
Amylin Pharmaceuticals Inc. (AMLN: sentiment, chart, options) makes and markets two injectable diabetes drugs, Byetta and Symlin, that are approved as adjunct diabetes therapies, according to Hoover's. The company is working on other diabetes drugs, including a once-weekly version of Byetta, as well as treatments for obesity. read more...
Have you ever found yourself chasing profits to make up for prior losing trades? Or quickly exiting a trade to avoid losses, only to watch the position come back strong after your untimely exit? If so, then adding stop losses to your trading tool box should be a top priority. These handy trading tools are basically orders placed with a broker to buy or sell a position once the equity or option reaches a certain price. But before we dive head-first into the various methods of implementing a stop loss, we should first understand the reasons why someone would, or better yet should, implement a trading strategy before jumping into the market. read more...
Boeing (BA) read more...
Today's Most Popular Stories
