Complex put spread takes aim at Eli Lilly
Chris McKhann | firstname.lastname@example.org
The option volume in the pharmaceutical giant has already matched its total daily average. More than 3,200 each of LLY's October 40 puts and January 34 puts traded in unison this morning. The big prints saw a trader buying 2,500 October 40 puts for the ask price of $2.12 against open interest of 8,577, according to optionMONSTER's systems.
At the same time, 2,500 January 34 puts were sold for the bid price of $0.78. The volume at that strike was more than 10 times its previous open interest, so it is a new opening position and the reason the trade caught our attention.
LLY is up 0.2 percent at $41.34. Shares have been range-bound for the last couple of weeks at their 2012 highs and just about matching four-year highs from the end of 2011.
The trade is apparently a diagonal put spread. This would mean that the trader is opening the long October 40 puts and selling the later, farther out-of-the-money January 34 puts to offset the cost. (See our Education section)