Eli Lilly Stock Soars on FDA Approval

LLY is up 30% in the last 12 months

Digital Content Manager
May 29, 2020 at 10:45 AM
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The shares of Eli Lilly (NYSE: LLY) are up 0.3% to trade at $150.22 this morning, after the Food and Drug Administration (FDA) approved the use of TAUVID, the first radioactive agent to detect an abnormal protein that is characteristic of Alzheimer's disease. Before this approval the only diagnosis method available for Alzheimer's disease was autopsy. 

Prior to today's breakthrough, analysts had been optimistic about the drugmaker, with six of the nine in coverage sporting a "strong buy", compared to three calling it a "hold" and not a single "sell" in sight. Meanwhile, Eli Lily's 12-month consensus target price sits at $156 -- a 3.5% premium to its current perch -- implying the equity is ripe for price-target hikes in the future.

Digging deeper, LLY shares have been on a steady climb since late 2019, now sitting at a 30% year-over-year surplus. In late April, the shares hit at an all-time-high of $164.90, cooling off slightly in recent weeks but finding support at their 80-day moving average.

It is no wonder then that calls have been so popular in the options pits. In the last 50 days, 2.33 calls were bought for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 98% of readings from the past year, meaning calls are being picked up at a faster-than-usual clip.  

Those options traders are in luck, because LLY premium is affordably priced at the moment. The security's Schaeffer's Volatility Index (SVI) of 28% sits in the 18th percentiles of all other readings from the past year. This means options players have been pricing in relatively low volatility expectations at the moment.  

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