Option Trade Could Return More Than $1,300 On A Wobbly Eli Lilly

Eli Lilly and Company (LLY) has been a subject of investor scrutiny recently, with its stock price experiencing volatility due to various factors. As the company's strategic initiatives, regulatory approvals, and market conditions continue to evolve, investors are seeking opportunities to capitalize on potential price movements. One such opportunity presents itself in the form of a bear put spread option trade, which could return more than $1,300 if Eli Lilly's stock price continues to decline.



The bear put spread strategy involves buying a put option at a higher strike price and selling a put option at a lower strike price, both with the same expiration date. In the case of Eli Lilly, this strategy could be implemented by buying a put option at the 700 strike and selling a put option at the 680 strike for the April 17 expiration. This trade would cost around $635 per contract, with a maximum potential profit of $1,365, which would be realized if Eli Lilly's stock price drops by 8.7% between now and the expiration date.



The breakeven point for this trade is $693.65, which is the strike price of the long put option minus the premium paid for the trade. If Eli Lilly's stock price is above this level at expiration, the investor would lose the entire premium paid for the trade, or $635. A stop-loss could be set at 50% of the premium paid, which in this case would be a loss of around $320.

This strategy allows investors to profit from a decline in Eli Lilly's stock price while limiting their downside risk to the premium paid for the trade. It is important to note that this strategy is a bearish position, and investors who believe that Eli Lilly's stock price may increase should not enter this trade. Additionally, investors should be aware of the risks associated with options trading, as they can lose 100% of their investment.



In conclusion, the bear put spread option trade on Eli Lilly presents an attractive opportunity for investors to capitalize on potential further declines in the company's stock price. With a maximum potential profit of more than $1,300 and a breakeven point at $693.65, this trade offers a compelling risk-reward ratio. However, investors should carefully consider the risks associated with options trading and consult with a financial advisor before making any investment decisions.