Bear Call Spread – LLY
📉 Parabolic rally stretches into extremes. Opened November 24.
Eli Lilly and Company (LLY) opened the week with yet another vertical extension, printing a fresh push toward the mid-$1,070s within the first minute of Monday’s session. The stock continues its near-parabolic ascent, moving further away from its intermediate moving averages and pressing into high-risk territory for late longs. While momentum remains undeniably bullish, several technical markers are flashing classic signs of exhaustion: RSI is hovering above 81, price is stretched far beyond the EMA cluster, and the daily candles are showing signs of climactic acceleration.
The question heading into a holiday-light week:
Can LLY sustain this velocity, or is a cooling phase the more probable outcome?
Setup Selection
Today’s chart again frames a textbook late-stage extension:
Daily RSI at 81+, firmly in the “statistically unsustainable” zone
Price sharply disconnected from EMA-12 and EMA-26
Donchian upper band being walked in a near-vertical slope
Momentum indicators remaining strong but beginning to flatten
On Monday’s open, LLY briefly surged to ~$1,075, then produced a candle with early signs of hesitation — still bullish, but no longer expanding with the same explosive force as prior sessions. These are classic markers of an instrument running ahead of itself.
My logic for the entry: This is not a bearish call on Eli Lilly as a company — it is a fade of an extreme short-term extension. When RSI exceeds 80 and price accelerates away from moving averages this far, the probability of consolidation or sideways digestion rises significantly. The 1130 short strike sits well above current price, offering a sizable buffer that requires LLY to stage an additional sharp breakout in just four days.
This setup targets the statistical tendency for stretched moves to stall rather than continue vertically at the same rate.
Why Bear Call Spread?
Defined risk with controlled exposure
Extreme RSI readings (81+) suggest exhaustion risk is elevated
Price far extended above EMA-12/26 — rarely sustainable
Profits from stagnation, consolidation, or pullback
Short strike at 1130 sits meaningfully above Monday’s highs
The setup does not require LLY to reverse.
It simply requires the stock not to explode another ~$55+ this week.
Trade Structure
Expiration: November 28, 2025
Short Call: 1130
Long Call: 1140
Contracts: 10
Credit Received: $0.55 per contract
Maximum Profit: $550 (gross)
Broker Fee: –$11.17
👉 View on OptionStrat
👉 View in Trade Log
Entry and Exit Plan
The position was opened Monday, November 24, at the market open, immediately as the price pushed through the low $1,070s. The spread structure places the short call far above the morning high, designed to withstand continued volatility while maintaining a strong probability of expiring worthless.
This is a pure mean-reversion/statistical setup:
Price is extended
Momentum is mature
The buffer is wide
Time to expiration is short
Theta works immediately
Plan: hold through expiration and collect full premium unless LLY threatens the 1130 short strike with expanding momentum and volume. Should price accelerate toward that level, the trade will be managed based on real-time structure and velocity.
The expectation: consolidation, digestion, or modest pullback — anything other than a continued vertical melt-up.
This week again applies the core framework: defined risk, high-probability buffer, mechanical execution.
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Disclaimer
All content is for informational purposes only and does not constitute financial advice.Any trades or strategies should be tested in a simulated environment before use.Trading involves risk, and all decisions are the sole responsibility of the reader.
Joining in a calendar version due to lack of BP in a small account 😁