Drug Stock Reverses from Record Highs Despite Blowout Earnings

The shares of Eli Lilly And Co (NYSE:LLY) are down 2.1% at $205.80 this afternoon -- likely due to some broad-market headwinds -- despite earlier surging to an all-time high of $218. The pharmaceutical giant reported better-than-expected fourth-quarter earnings of $1.42 per share this morning, as well as a revenue beat. The firm attributed the strong results to a 41.5% profit rise, thanks to higher demand for its diabetes drugs and the success of its Covid-19 antibody treatment. 

The security has been tearing up the charts since November, bouncing off its 20-day moving average and forming a channel of higher highs. Several bull gaps helped shares to today's peak, which is nearly double the equity's March lows. Year-over-year, LLY is up 44.4%.

Analysts were overwhelmingly optimistic toward Eli Lilly stock coming into today, with nine of the 12 in coverage sporting a "strong buy" rating, while only three called it a tepid "hold." Meanwhile, the 12-month consensus target price of $201.63 is a 2% discount to current levels. 

The options pits lean bullish too, with an appetite for calls. This is per the security's 50-day call/put volume ratio of 3.44 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 95% of readings from the past year. This means calls are being picked up at a quicker-than-usual clip.

It looks like now is the time to take advantage of LLY's next move with options, after a post-earnings volatility crush. The equity's Schaeffer's Volatility Index (SVI) of 35% sits in the relatively low 28th percentile of its annual range, indicating options players are pricing in low volatility expectations at the moment.