Illumina (ILMN) 11/11/09 PriceWatch Alert Could Hit 22.50% Return

Posted: Wednesday, November 11, 2009 8:40 AM EDT
By: Market Intelligence Center Staff

Illumina (NasdaqNM: ILMN) closed yesterday at $32.99. So far the stock has hit a 52-week low of $18.82 and 52-week high of $44.07. Illumina stock has been showing support around 32.54 and resistance in the 33.58 range. Technical indicators for the stock are Bearish and S&P gives ILMN a positive 4 STAR (out of 5) buy rating. ILMN appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Mar '10 30 covered call (IQA CF) for a net debit in the $27.79 area. That is also the break even stock price for this trade. This covered call has a 129 day duration, provides 15.76% downside protection and a 7.95% assigned return rate for a 22.50% 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 '11 10 Call (ZYC AB) and selling the Mar '10 30 call (IQA CF) for an $18.30 debit. The trade has a 129 day life and would provide 14.22% downside protection and a 9.29% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Illumina does not pay dividends at this time. [WBA-Seven Summits Research]