LLY – Eli Lilly & Co. – Options investors are celebrating the pharmaceutical maker’s better-than-expected second-quarter earnings report, released ahead of today’s opening bell, by initiating bullish transactions on the stock. LLY earned $1.24 per share in the second-quarter, easily surpassing average analyst expectations of $1.10 per share. The firm’s shares increased as much as 2.6% at the starting the session to secure an intraday high of $35.85, although the rally has cooled slightly by 11:05 am (ET), with the price of the underlying stock up 0.70% on the day to stand at $35.20. Significant increases in sales of a number of the company’s drugs, such as Zyprexa and Cymbalta, and the firm’s decision to raise its 2010 earnings forecast pushed Eli Lilly’s shares higher today. Optimistic options players populating LLY this morning employed diverse trading strategies. One investor appears to have initiated a credit put spread, selling 1,700 puts at the August $35 strike for an average premium of $0.72 each, and buying the same number of puts at the lower August $33 strike for an average premium of $0.22 apiece. The spread yields a net credit, or maximum profit, of $0.50 per contract. The trader keeps the full credit received as long as shares exceed $35.00 through expiration day next month. However, the responsible party is exposed to losses should shares slip beneath the effective breakeven price of $34.50, with maximum potential losses of $1.50 per contract if the price of the underlying stock settles below $33.00 at expiration day. It is possible the transaction represents an investor closing out a long debit put spread, rather than putting on a riskier credit spread, but both scenarios are bullish plays. Further along, in the September contract, it looks like one optimistic individual initiated a bullish risk reversal, selling approximately 1,500 puts at the September $33 strike for an average premium of $0.43 each in order to purchase the same number of calls at the higher September $36 strike for an average premium of $0.53 apiece. The average net cost of the transaction amounts to $0.10 per contract and positions the trader to make money if Eli Lilly’s shares surpass the effective breakeven price of $36.10 by expiration day in September.