Eli Lilly (LLY) 11/3/09 PriceWatch Alert Bullish Price Movement

Posted: Tuesday, November 03, 2009 8:44 AM EDT
By: Market Intelligence Center Staff

Eli Lilly (NYSE: LLY) closed yesterday at $34.05. So far the stock has hit a 52-week low of $27.21 and 52-week high of $40.78. Eli Lilly stock has been showing support around 33.65 and resistance in the 34.39 range. Technical indicators for the stock are Bullish and S&P gives LLY a neutral 3 STAR (out of 5) hold rating. LLY appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 35 covered call (LLY DG) for a net debit in the $32.60 area. That is also the break even stock price for this trade. This covered call has a 165 day duration, provides 4.26% downside protection and a 7.36% assigned return rate for a 16.29% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the LLY Jan '11 25 Call (VIL AE) and selling the Apr '10 35 call (LLY DG) for a $7.65 debit. The trade has a 165 day life and would provide 4.11% downside protection and a 30.72% assigned return rate for a 68.00% annualized return rate (for comparison purposes only). Eli Lilly has a current annual dividend yield of 5.74%. [ATU-Seven Summits Research]