$LLY Options Intelligence

🎯 SELL LLY NOV 14 1100 CALL, BUY LLY NOV 14 1120 CALL (Bear Call Spread)

I recommend a bear call spread with the November 14 expiration because the term structure shows near-term options are underpriced relative to historical baseline volatility, and the stock is currently overbought with RSI at 81.32, trading near $994.65, just below the key resistance level around $1,100 (market maker max pain). The recent Leerink Partners upgrade and price target raise to $1,104 has fueled a strong rally, but the very high IV rank (100%) and heavy call buying (put/call volume ratio 0.02) suggest a potential short-term pullback or consolidation, making a defined-risk credit spread prudent.

Trade Details:

• Sell 1 LLY Nov 14 1100 Call (near resistance, delta ~0.018)
• Buy 1 LLY Nov 14 1120 Call (hedge against large upside)
• Stock Price: $994.65
• Entry Credit: Approximate net credit of $1.00 (based on typical bid/ask spreads and IV of 57.8% on 1100 calls)
• Max Risk: $20 - $1.00 = $19 per spread
• Max Reward: $1.00 credit per spread
• Breakeven: $1101.00 at expiration
• Days to Expiration: 2 days (Nov 14)

📈 Term Structure & Volatility Analysis

• Baseline 90-day Historical Volatility: 31.4%
• 2-day Clean IV: ~28.2% (below baseline, indicating options are underpriced short term)
• Market IV on Nov 14 1100 Calls: 57.8% (elevated due to event premium)
• IV Rank: 100% (options are expensive overall, favoring premium sellers)
• Expected Daily Move: ±$26.57 (~2.67%)
• Earnings Date: 2026-02-05 (far after this expiration, so no earnings risk)
• Calendar Opportunity: No significant adjacent expiration IV differential for calendar spread on this strike

📊 Greeks & Market Sentiment

• RSI(14) at 81.32 indicates overbought conditions, increasing chance of short-term pullback or sideways movement.
• MACD bullish but momentum may slow near resistance.
• Heavy call buying (put/call volume ratio 0.02) suggests possible short-term exhaustion.
• Market Maker Max Pain at $1,100 aligns well with short strike, increasing probability of price staying below this level near-term.

🎯 Why This Trade

The term structure shows short-term options are relatively underpriced after stripping out the event premium, making selling premium attractive. The stock is at an all-time high near $995, with strong recent gains fueled by obesity drug adoption expectations and analyst upgrades. However, the overbought RSI and very high IV rank suggest a near-term pullback or consolidation is likely. Selling the 1100/1120 call spread captures premium while limiting risk if the stock spikes above $1,100. The short duration (2 days) reduces time risk and allows quick capture of premium decay.

This trade aligns with the current market intelligence: "Shares jumped 4.9% after Leerink Partners upgraded LLY and raised price target to $1,104, expecting multiple waves of obesity treatment adoption." The market has priced in optimism, so a defined-risk credit spread near resistance is prudent.

📊 Pro Analysis

• Current IV (42.4%) is significantly above historical (21.4%), favoring premium selling.
• Put/Call volume ratio of 0.02 is extremely bullish but suggests heavy call buying that may reverse short-term.
• Expected daily move of ±$26.57 supports the 1100 strike as a strong resistance level.
• No earnings risk before expiration.
• Technical resistance near 1100 and RSI overbought support a cautious bearish spread.

🔍 Earnings Date Check

• Earnings on 2026-02-05
• Recommended expiration Nov 14 is well before earnings → no earnings risk, suitable for short-term premium selling.

💡 Trade Management

• Entry: Place limit order to sell Nov 14 1100 Call and buy Nov 14 1120 Call for net credit ~$1.00
• Target: Close spread at ~50% of max profit (~$0.50) if price stays below 1100
• Stop: Close if price breaks and holds above 1120 before expiration
• Time Stop: Close by Nov 13 end of day to avoid last-minute gamma risk

🔒 Pricing Validation

• 1100 Call intrinsic value: max(0, 994.65 - 1100) = $0 (OTM)
• 1120 Call intrinsic value: $0 (further OTM)
• Spread max loss: $20 - $1 credit = $19 (limited risk)
• Put-call parity and bid/ask spreads respected per current market data

🔍 Market Overview

The market regime is bullish for LLY fueled by strong fundamentals (EPS $20.50, revenue $59.42B, profit margin 31%) and positive news on obesity drug adoption, including Medicare/Medicaid expansion by 2027. However, the stock is at an all-time high with RSI indicating overbought conditions and IV at peak levels, signaling caution for new longs. The pharmaceutical sector is generally stable, with peers like ABBV, PFE also showing mixed momentum. The upcoming dividend ex-date (Nov 14) may add slight volatility but is factored into option prices. The Fed policy remains steady, and no major macroeconomic events are imminent before this trade’s expiration.

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Confidence Level: Moderate to High for short-term premium selling given overbought technicals, high IV rank, and recent news-driven rally. Risk is limited by defined spread width.

Risk Assessment: Max loss $19 per spread, limited to 20 points width minus credit. Risk of a sharp breakout above 1120 exists but is low probability given current resistance and volume patterns. Close management recommended given short time frame.

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This trade takes advantage of the current overbought technicals, high IV rank, and recent bullish news priced in, aiming to collect premium with controlled risk near resistance at $1,100.

If you want, I can also analyze longer-dated spreads or bullish strategies after earnings.