A large trader is positioning for a potential drop in Eli Lilly ahead of the pharmaceutical giant's earnings report today.
optionMONSTER's Depth Charge system shows that 5,000 May 55 puts were bought in one print for $0.31 yesterday. This is clearly a new position because the volume was above the strike's open interest of 3,991 contracts before the trade appeared.
LLY rose 1.3 percent yesterday to close at $58.33 after peaking at $58.40 in the morning, its highest intraday price since October 2007. The company is scheduled to issue first-quarter results before the market opens today.
Yesterday's puts, which lock in the price where shares can be sold, were not tied to any stock trading identified by our systems during the session. These options could be a straight bearish bet that the stock will fall but, given how high shares have run, they could well be a protective hedge on a long position established earlier.
Either way, the contracts will expire worthless if LLY remains above the $55 strike price through mid-May. (See our Education section)
Total volume in the name exceeded 12,500 contracts yesterday, more than 2.5 times its daily average for the last month. Puts outpaced calls by 2 to 1.
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