DailyPlay Opening Trade (LLY) – April 21, 2022

View LLY Trade

Strategy Details

Strategy & Direction: Short Put Vertical Spread – Bullish

Details: Sell 4 May 6 $292.50/$285 Put Verticals @ $3.14 Credit

Total Risk: This trade has a max risk of $1,744(4 contracts x $436 per contract). 

Trend Continuation Signal: This is a Bullish strategy on a stock or ETF that is experiencing a bullish trend.

1M/6M Trends: Neutral/Bullish

Technical Score: 10/10

OptionsPlay Score: 93

Learn how to size this trade for your portfolio size

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade.

Investment Rationale

When we look at the chart of Eli Lilly & Co. (LLY), we see that it had been trading in a perfect channel since last summer (the blue shaded zone) that then broke out upside in early April, only to see the last week or so come right back off. However, now it’s right by its cloud model’s Base Line (in orange) and the top of the channel it broke out from. Thus, this is an important support area, and one that should hold if it was a good breakout. With earnings due a week from today, we can play a fairly short-dated option that limits our risk if earnings disappoint, but gives us a worthwhile reward if they don’t. So, let’s look to short the May 6th $392.5/$385 put spread, which closed at $3.16 yesterday based upon mid prices.