LLY is an industry leader with strong fundamentals; despite significant earnings growth compressing its P/E ratio, the stock remains historically expensive.

to take a look at the performance of Eli Lilly's stock over the past year. This stock has largely, and in many ways, become the benchmark for the pharmaceutical industry. Stocks rose by about 50% during this period, but have fallen by more than 10% since reaching their all-time high about a month ago.

It is time to delve deeper into the details of Eli Lilly and the broader weight loss and obesity pharmaceutical sector.

Is it still safe to say that there are only two major players when it comes to producing these products, namely Eli Lilly, which we will focus on, and of course Novo abroad? Yes, I would say that you hit the nail on the head.

I mean, we're talking about two huge giants. We have Eli Lilly and we have Novo , and their product range is similar, but there are differences between them.

Eli Lilly products, such as the soon-to-be-launched "Retatroid", are considered better than Novo products. I say it's better because it's more efficient; it leads to greater weight loss with far fewer restrictions, right?

With Novo's "Wegovi" drug, there are certain restrictions on food and water intake, which you don't necessarily find with Eli Lilly.

So, there are a lot of innovations in this area, but you give Eli Lilly a little preference. You can see that in earnings per share. I was checking that this morning. I mean, they are on track to achieve more than $50 per share within the next few years.

Their profit margins have increased by 8% over the past four years, while their revenues have exploded. Therefore , you can clearly see the superiority of their product range reflected in their financial statements.

Hems & Hers Health is essentially a healthcare platform , and the beauty of it is that it does n't matter which pharmaceutical company wins the race to develop the drug, because if the drug is available on the Hems platform, the company will benefit, whether it's Eli Lilly, Novo Nordisk, or any other entity entering the market.

Think about it, if you were Novo, Eli Lilly, or any other pharmaceutical company , what is something you are not good at? Well, in general it's marketing and distribution, and also, as you know, customer acquisition; You do not have actual subscribers in the field of pharmaceuticals.

So, if you can delegate that to an expert, and all you have to do is manufacture, develop, and ship the products to actual distributors, that's a very profitable deal.

Let's talk about "Eli Lilly". This is the immense power, as Raoul said. Yes, I think Raoul made a very good point about the valuation of this company and how profits and the price-to-earnings ratio have grown significantly.

So, the price-to-earnings ratio is about 24 times, right? At the peak of 2023, that forward ratio was around 70, but earnings provided that support and lowered valuations as they continued to grow.

Their growth rate is truly astonishing in this field. The stock is still historically expensive , but the overall market potential for future expansion may justify the 50% gains we have seen over the past twelve months.

As I mentioned, we are only about 11% below our all-time highs reached last month. So, I looked at the strategy. I mean, this is a stock that costs $1,150, right? So, the options market makes sense if you want to use it as a directional bias and create some leverage instead of trading the stock directly, right? This is an expensive, capital-intensive stock.

Therefore , I looked at a neutral position to my upside here. If you believe the stock will rise , or perhaps stabilize, or even decline slightly, you can still profit from this vertical position selling neutral to bullish put options.

Moving on to the October options that expire on October 16 in 28 days, we will sell a call option with an execution price of $1,100, which is out of range, and we will buy a call option with an execution price of $1,080.

So, a short vertical position for buy options with a $20 spread and a neutral to bullish outlook. You receive a credit of approximately $5 . The balance you accumulate is what you can earn as profit.

So, $500, but that means I'm taking a risk of $1,500, right? Well, I have a much higher risk than reward, but the probability that the $1,100 strike price you sell in this vertical position will still be out of range at expiration is over 68%.

So, the odds of profitability are in your favor at this stage because you have that large margin of safety, right? The break-even point is $1,095 on the downside. This is about 4.5% less than the current share price, Alex.

So , you have that safe space. You have better odds, but the trade-off is that you face a slightly higher risk than the potential return in this deal . You have 28 days in this deal. So, you have enough time here.

The idea here is for the stock to stay above the $1,100 level and for the short vertical position to expire worthless. You keep the $500 you collected for each contract. I believe one of the key factors is that it has received repeated support at approximately the 1110 level over the past two months.

Therefore, from a technical standpoint, the 1110 level may become a support zone that the stock cannot fall below again. This level has held for the past two months .