Illumina (ILMN) PriceWatch Alert At $30.13 Break Even

Posted on Friday, October 03, 2008 8:07 AM

Illumina (NasdaqNM: ILMN) closed yesterday at $36.53. So far the stock has hit a 52-week low of $25.17 and 52-week high of $47.88. Illumina stock has been showing support around 33.70 and resistance in the 40.42 range. Technical indicators for the stock are Bearish and S&P gives ILMN a neutral 3 STAR (out of 5) hold rating. ILMN appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '09 32.50 covered call (IQA AT) for a net debit in the $30.13 area. That is also the break even stock price for this trade. This covered call has a 106 day duration, provides 17.52% downside protection and a 7.87% assigned return rate for a 27.09% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the ILMN Jan '10 7.50 Call (LYC AO) and selling the Jan '09 32.50 call (IQA AT) for a $22.90 debit. The trade has a 106 day life and would provide 16.78% downside protection and a 9.17% assigned return rate for a 32.00% annualized return rate (for comparison purposes only). Illumina does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]