Eli Lilly: Options Surge on FDA Ruling

By David Russell

Stock and options trading took a bullish turn in Eli Lilly (LLY) late Friday after the Food & Drug Administration approved the company's Effient blood-thinning drug.

New money poured mainly into the July 32.50 calls and July 35 calls. The July 32.50 calls traded 8,860 times for $0.80 to $1.70 against open interest of 2,910. The July 35 calls were purchased for $0.05 to $0.25, although volume in the strike was less than half existing open interest.

LLY rose 0.97 percent to $33.32 and has traded between $32 and $36 for almost four months. Volume in the shares exploded to twice the daily average after announcement on Effient which Credit Suisse estimates will generate $1.5 billion of revenue by 2013. The drug will compete against Plavix, sold by Sanofi-Aventis's and Bristol Meyers Squibb.

optionMONSTER's tracking systems also detected buying of the July 32.50 and August 30 puts. The activity probably resulted from investors buying protection on new positions in the shares.

Options volume in LLY was almost five times average Friday, with calls exceeding puts by more than 2 to 1. The company is scheduled to report earnings on July 22, three sessions after July expiration.

(Chart courtesy of tradeMONSTER)