Unusual Options Activity Alert: Eli Lilly (LLY) & Lehman Brothers (LEH)
Eli Lilly Sees Bulls Flow Despite Byetta Worries
Eli Lilly (LLY) saw bullish order flow Tuesday, despite a second day of losses in shares of the pharmaceutical company. LLY and partner Amylin (AMLN) shares fell Monday and again Tuesday on news the FDA received reports of 6 cases of pancreatitis in patients taking Byetta.
A CNBC commentator reported yesterday afternoon that the companies issued a statement saying reports of pancreatitis complications are very rare and in proportion with what is seen in the general population. According to the commentator, the bigger question is what the news means for the once a week version of Byetta, which is in late stage developments by AMLN, LLY, and Alkermes (ALKS). It could potentially slow down the approval.
Yet, while the news isnít bullish, some investors seem to be taking a contrary view of the situation. Todayís volume in Eli Lilly includes a block of 10,000 January 60 calls traded offerside or for $.40 a contract. The October 55s are also active, with 4,555 contracts traded and 85 percent of todayís volume on the offer. 23,000 calls have traded in all and sentiment based on options order flow in LLY is 72 percent bullish.
Bullish Flow, in Lehman?
Lehman Brothers (LEH) continues to take a beating on write-down fears. JP Morgan analysts said Tuesday that the investment firmís exposure to mortgage securities could result in write downs of up to $4 billion in the third quarter. Lehman options are active as usual, with 85,000 calls and 83,000 puts trading on the day. Interestingly, although the stock is down $1.87 to $13.17, the dayís top trades are very bullish bets.
Shortly after noon Eastern time, an order for 19,500 LEH Jan-10 calls traded offerside for $4.15 a contract on the NYSE. At the same time, 19,500 of Jan-10 30 calls traded bidside for $1.95 a contract. Open interest in the 20s is 7,543 and in the 30s, 5,720. So, taken together, it looks like this strategist was opening a substantial bull call spread and betting that shares of Lehman will make a significant move above $20 a share between now and January 2010 options expiration.
Posted By: Fred Ruffy
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About Frederic Ruffy
Frederic Ruffy is a Freelance Writer and Options Trading Strategist. In addition to writing market commentary and trading-related books and articles, Fred has also worked as an instructor, educating investors on advanced topics like measuring volatility, the benefits of sector rotation and the risks and potential profits from trading around earnings. His market observations are mentioned frequently in the financial press and he currently trades stocks, futures, and options in Salt Lake City, Utah.
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