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Eli Lilly’s earnings: Earn $1,300, and buy shares cheaper
Want to own Eli Lilly shares, but not at today's price? What if you could collect a premium while waiting for a better entry point?
With Eli Lilly's earnings approaching on 29 October, investors may have an opportunity to explore exactly that through a strategy called a cash-secured put.
The idea is simple: collect an option premium upfront and agree to buy shares at a lower price if they fall below a level you choose. If the shares stay above that level through expiry, you can keep the premium without buying the stock.
With Eli Lilly's earnings approaching on 29 October, investors may have an opportunity to explore exactly that through a strategy called a cash-secured put.
The idea is simple: collect an option premium upfront and agree to buy shares at a lower price if they fall below a level you choose. If the shares stay above that level through expiry, you can keep the premium without buying the stock.
Of course, there is a catch: if the stock falls sharply, you may have to buy it at a price above its market value.
Why Eli Lilly, and why now?
While much of the market's attention has been on AI stocks and concerns about their valuations and rising investment costs, Eli Lilly (NYSE: LLY) has been riding a different growth story.
Shares are up around 16% year-to-date, supported by booming demand for its diabetes and weight-loss treatments, Mounjaro and Zepbound.
In the second quarter of 2026, Lilly reported:
- 48% revenue growth to US$23 billion.
- Strong demand for its obesity and diabetes medicines.
- Higher full-year revenue guidance, reflecting continued business momentum.
For investors with significant exposure to technology and AI, healthcare also offers diversification. Lilly's growth depends more on demand for medicines than on AI infrastructure spending.
But after a strong rally, some investors may hesitate to buy the stock at today's price.
This is where a cash-secured put could become interesting: instead of chasing the stock higher, investors can potentially get paid while waiting for a lower entry price.
What is a cash-secured put?
A cash-secured put is an options strategy where you sell a put option and receive a premium upfront in exchange for accepting the obligation to buy shares at a predetermined price if assigned.
Because the strategy is "cash-secured", you set aside enough cash to purchase the shares if assignment occurs. Since one options contract typically represents 100 shares, you must reserve sufficient funds to buy 100 shares at the strike price.
Many investors use this strategy when they would be comfortable owning a stock, but only at a lower price than where it currently trades.
A case study with Eli Lilly
Suppose you'd be happy to buy Eli Lilly shares, but only if they fell to a lower level than the current market price.
You could sell the 30 October 2026 (one day after its scheduled earnings announcement) US$1,155 put option.
Key contract details:
- Current share price: US$1,251.25
- Strike price: US$1,155
- Option premium received (last traded): US$13.00 per share
- Contract size: 100 shares
- Expiry: 30 October 2026
- Delta:-0.18
By selling one contract, you would receive approximately:
US$13.00 × 100 = US$1,300
This premium is yours to keep regardless of what happens later, provided you maintain the position.
Because the strategy is cash-secured, you would set aside:
US$1,155 × 100 = US$115,500
If assignment occurs, your effective purchase price becomes:
US$1,155 − US$13 = US$1,142 per share (~9% discount to current price)
Your break-even price is therefore US$1,142.
How Could This Play Out?
At option expiry | Share price | What happens | Result |
Shares remain above the strike | Above US$1,155 | Put expires worthless | You keep the full US$1,300 premium. No shares are purchased. |
Shares fall below the strike | Below US$1,155 | Assignment occurs and you buy 100 shares at US$1,155 | Losses may occur if the share price is below the US$1,142 break-even level. |
What are the risks?
There are both company-specific and strategy-specific risks to consider.
For Eli Lilly, investor attention remains focused on demand trends for its diabetes and obesity treatments, execution of its product pipeline, clinical trial outcomes, and regulatory developments. Recent company updates have also highlighted continued expansion of its obesity and immunology franchises, including positive clinical data announcements.
Some key risks include:
- Slower-than-expected growth in obesity or diabetes products.
- Unexpected clinical trial setbacks.
- Regulatory or reimbursement changes.
- Increased competition from other pharmaceutical companies.
- Earnings results that fail to meet elevated market expectations.
From a strategy perspective:
- The stock can decline significantly after earnings.
- The premium received provides only limited downside protection.
- Assignment can occur, requiring substantial capital.
- Capital remains tied up while the position is open.
A cash-secured put should therefore only be considered if you are genuinely comfortable owning the shares at the effective purchase price.
Why might this appeal to a long-term investor?
Some long-term investors view cash-secured puts as a way to get paid while waiting for a potentially lower entry price.
Rather than placing a limit order at US$1,155, you could sell a put and collect premium income while waiting. If the shares remain above the strike, you keep the premium. If the shares decline and assignment occurs, you acquire the shares at an effective cost basis of approximately US$1,142, which is lower than the strike price because of the premium received.
The strategy does not eliminate risk, but it may be attractive to investors who already have a long-term interest in owning the company and have the cash available to purchase shares if required.
Key Definitions
Strike Price
The price at which you may be required to buy shares if assigned.
Premium
The amount received upfront for selling the option.
Assignment
The process through which the option seller becomes obligated to buy shares at the strike price.
Expiry
The date on which the option contract ceases to exist.
Break-Even Price
The strike price minus the premium received. In this example: US$1,142.
Cash-Secured
A position where enough cash is reserved to purchase the shares if assignment occurs.
Delta
An options metric indicating how sensitive the option price is to movements in the underlying share price. The selected contract has a delta of approximately-0.18, suggesting a relatively low probability of finishing in-the-money.