LLY November 21st Options Begin Trading

Analysis of Eli Lilly (LLY) options reveals potential strategies for investors, focusing on the $720 put and $750 call contracts. Selling the $720 put offers a potential 9.44% return (19.47% annualized) if it expires worthless, with a 59% probability based on current data; assignment would yield a cost basis of $652 per share. A covered call strategy using the $750 call offers a 13.25% return if the stock is called away, while a worthless expiration yields a 9.84% boost (20.29% annualized), with a 47% probability. The implied volatility for both contracts is approximately 40%, compared to a trailing twelve-month volatility of 38%.

Analysis

The analysis of Eli Lilly (LLY) options expiring November 21st reveals two distinct strategies for investors. Selling the $720.00 strike put contract, currently bid at $68.00, offers a potential entry point into LLY at an effective cost basis of $652.00 per share, a discount to the current trading price of $725.32. This out-of-the-money put (approximately 1% below current price) has a 59% probability of expiring worthless, which would yield a 9.44% return on cash commitment (19.47% annualized), termed YieldBoost. Alternatively, for existing LLY shareholders, selling the $750.00 strike call contract, bid at $71.40, as a covered call presents an opportunity for income generation. If LLY's stock price is above $750.00 at expiration, this strategy would result in a total return of 13.25% (excluding dividends). This call strike is approximately 3% out-of-the-money, with a 47% chance of expiring worthless. Should this occur, the premium collected would represent a 9.84% income boost (20.29% annualized YieldBoost). Both option strategies exhibit an implied volatility of approximately 40%, slightly above LLY's actual trailing twelve-month volatility of 38%, suggesting option premiums may be marginally elevated.

Key Decisions for Investors

• Investors bullish on Eli Lilly and seeking to acquire shares at a lower effective price than the current market might consider selling the $720 put, offering a cost basis of $652.00 or a 9.44% return if it expires worthless.
• Current Eli Lilly shareholders aiming to generate income and willing to cap upside potential could evaluate selling the $750 covered call, which provides a 13.25% return if called away or a 9.84% premium income if it expires worthless.
• Given the implied volatility of 40% is slightly above the historical volatility of 38%, option selling strategies like those presented may offer slightly more attractive risk-reward profiles due to richer premiums.