Eli Lilly Stock Named Top Pick at J.P. Morgan Securities

Short-term LLY traders are more call-heavy than usual

Emma Duncan
Jul 11, 2018 at 9:58 AM
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J.P. Morgan Securities named Eli Lilly and Co (NYSE:LLY) a top pick among pharma stocks, waxing optimistic on the company's early product launch cycles. The brokerage firm also said LLY will see a more modest impact from forex impacts than some of its sector peers -- most notably Pfizer (PFE), which just announced it will be splitting into three units. Likewise, SunTrust Robinson suggested accumulating ABBV over PFE, given the former's volume-driven sales growth.

In spite of this optimism, LLY is down 0.3% this morning at $87.77 amid broad-market headwinds. Longer term, Eli Lilly stock has added 14% since its early May low near $77. Further, the pharmaceutical concern last night closed at $88.05 -- a mere chip-shot from its mid-December two-year high. 

Digging into options, LLY stock sports a Schaeffer's put/call open interest ratio (SOIR) of 0.44, which ranks in the 10th percentile of its annual range. In other words, this low ranking suggests traders are more call-heavy than usual among options set to expire in three months or less.

More specifically, the July 87.50 call is home to peak open interest of 13,227 contracts. It's hard to tell whether these calls were bought or sold, but those currently looking to buy premium on the equity are in luck. The drug concern's Schaeffer's Volatility Index (SVI) of 14% registers in the 5th percentile of its annual range. In other words, near-term options are pricing in extremely low volatility expectations at the moment.


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