Eli Lilly Stock Looks Good for Call Buyers

The shares could move even higher with a round of analyst upgrades

Nov 20, 2018 at 1:44 PM
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The shares of pharmaceutical firm Eli Lilly and Co (NYSE:LLY) gapped higher in mid-November on news the company submitted a new drug application for its migraine treatment to the Food and Drug Administration (FDA). This pop brought the shares back above the $111 level, which is 50% above the stock's 2018 closing low of $74.21 from Feb. 8. Plus, LLY is trading north of a trendline connecting lower highs over the past month, which could serve as support going forward.

eli lilly daily chart nov 16

 

A round of well-deserved upgrades could help the shares add to their nearly 35% year-to-date lead, considering nine of 18 analysts still maintain a lukewarm "hold" rating on LLY.

Now appears to be an attractive time to purchase premium on near-term LLY options, too, with its 30-day at-the-money implied volatility of 20.2% in line with the broad market. Lastly, the leverage ratio on our recommended call option is 8.78, and will double in value on an 11.2% gain in the underlying equity.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this LLY commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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