The world may be politically and economically volatile, but there is one sentiment that unites almost everyone: the incessant pursuit of physical fitness and financial prosperity.
In the midst of global chaos, this desire for health and wealth may appear trivial. However, its lasting appeal remains unscathed even in the face of current anxieties. We previously noted in early September that the world was experiencing an extraordinary moment characterized by its malleability, a state we likened to “plastic.” Unfortunately, our observation has proven to be accurate.
Since then, stocks have plummeted and the Cboe Volatility Index, commonly known as the VIX, has surged amid mounting fears that the problems in the Middle East could potentially ignite a third World War.
Should that cataclysmic event occur and shatter the post-World War II order, the markets would undoubtedly descend into chaos. Nevertheless, it is likely that people would still universally acknowledge that one can never be too wealthy or too physically fit. It is important to note, however, that this sentiment assumes widespread famine or a nuclear catastrophe will not emerge from the current conflicts.
For those who share this sentiment of desiring both riches and a slender figure, an intriguing opportunity awaits. By selling cash-secured puts on Eli Lilly (ticker: LLY), one has the potential to monetize this notion.
Eli Lilly, a prominent pharmaceutical company, is anticipated to gain approval for its Mounjaro diabetes drug as a treatment for obesity. This prospect has sparked great enthusiasm among analysts who have rapidly raised Eli Lilly’s stock price targets in expectation of exceptional earnings growth.
To illustrate this further, consider the following scenario: with Eli Lilly’s stock currently valued at $592.33, investors have the option to sell the November $560 put for approximately $10.50. If the stock remains above the strike price at the time of expiration, investors can retain the put premium.
In the event that the stock price falls below the strike price, investors will be obligated to purchase the stock at an effective price of $549.50 (strike price less premium), or make adjustments to their put position to avoid assignment.
Amid an uncertain world, the desire for both wealth and good health remains resolute. For those who resonate with this sentiment, seizing the profit potential offered by Eli Lilly may prove to be a fruitful endeavor.
Eli Lilly’s Stock and the Obesity Drug Thesis
Eli Lilly’s stock is currently displaying an intriguing technical pattern. Following a historic rally, the shares have started to decline, indicating a potential test of the stock’s technical support. This has happened multiple times in the past, and savvy investors have consistently taken advantage of these moments of weakness.
However, there is a notable difference between the current situation and previous instances. The overall macro-market landscape is significantly altered. Therefore, anyone considering a trade involving Eli Lilly is essentially expressing their confidence in the robustness of the obesity drug thesis, suggesting that it can weather any challenges that may arise in the broader market.
Despite its promising prospects, Eli Lilly does carry some stock-specific risks. The company’s shares have surged by approximately 62% this year, outperforming the overall stock market by a wide margin. Furthermore, the stock is currently trading at an incredibly high earnings multiple, which will be put to the test when Eli Lilly releases its third-quarter earnings report on November 2nd. Investors will undoubtedly pay close attention to this report and any accompanying remarks regarding the future outlook, as it will certainly impact their enthusiasm for obesity drugs.
Over the past 52 weeks, Eli Lilly’s stock has fluctuated between a low of $309.20 and a high of $629.97.
Despite these stock-specific risks, undertaking a cash-secured put trade on Eli Lilly seems like a reasonable bet for investors who find it difficult to stay idle during these tumultuous times.
In previous weeks, we have emphasized the significance of monitoring global affairs from the safety of high-yielding bonds to mitigate equity risk. However, we understand that many investors struggle with patience—just as people find it challenging to prioritize exercise and a healthy diet in a culture that favors quick fixes and constant movement.
While it is undoubtedly preferable to engage in regular exercise, maintain a balanced diet, and consume less alcohol, many doctors express their frustration with patients who prefer relying on medication or injections rather than putting in the hard work. Consequently, the potential market for pharmaceutical treatments of obesity is enormous.