Market News

November 28, 2016  Mon 8:02 AM CT

At least one trader is counting on a bounce in Eli Lilly by Christmas.

OptionMonster's market scanner shows that 1,200 December 72.50 calls were purchased for $0.58 while 1,200 December 64 puts were sold for $0.50 on Friday. Volume was above the open interest in both strikes, showing that these are new positions.

This combination trade is especially bullish because a rally would boost the price of the long calls while decreasing the value of the puts that were sold. But the opposite will occur if the stock drops, and the trader will be on the hook to buy shares if they fall below $64 by expiration. (See our Education section)

LLY rose 1.65 percent to $69.12 on Friday but is down 13 percent in the last three months. The drug company's next quarterly report is scheduled for pre-market hours on Jan. 31.

Overall option volume was about average in LLY on Friday, with calls eclipsing puts by a narrow margin.

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