Illumina (ILMN) PriceWatch Alert With 16.38% Downside Protection

Posted on Monday, October 06, 2008 8:07 AM

Illumina (NasdaqNM: ILMN) ended the last trading session at $36.01. 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 34.92 and resistance in the 38.00 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 Mar '09 35 covered call (IQA CG) for a net debit in the $30.11 area. That is also the break even stock price for this trade. This covered call has a 166 day duration, provides 16.38% downside protection and a 16.24% assigned return rate for a 35.71% 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 15 Call (LYC AC) and selling the Mar '09 35 call (IQA CG) for a $17.00 debit. The trade has a 166 day life and would provide 11.14% downside protection and a 17.65% assigned return rate for a 39.00% 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]