Sell (20) NOV 48.0 strike Puts @ 0.39 = $(780)
Sell (20) NOV 49.0 strike Puts @ 0.63 = $(1,260)
Buy 20 NOV 50.0 strike Puts @ 1.00 = $2,000
Sell (10) NOV 52.5 strike Calls @ 0.44 = $(440)
Initial Trade P&L = $0 This is a Put Condor fully financed by the sale of a Call. Aside from commissions, the trade costs nothing. Lilly is an excellent option trader's stock given the deep liquidity in the options. This translates into extremely narrow bid/ask spreads that lowers the cost and increases the ease to enter and exit the trade. In this trade, profit is achieved between $47 and $50 by expiration with maximum profit of $2,000 occurring between $48 and $49 by November expiration. The risk in the trade is to the upside as we sold the NOV 52.5 strike Calls to fund the purchase of the Put Condor. Losses begin to incur above $52.50 (by expiration) thus it is important to set a pre-determined risk limit prior to putting on this trade. Pelz has no position in Eli Lilly. To learn more about using options to trade biotech stocks, check out Tony Pelz's book, The Biotech Trader Handbook or subscribe to Chimera Research Group.