ILMN Covered Call trade
February 18, 2015 MarcoTrade 7,520
Selling at-the-money or slightly out-of-the-money calls for Illumina has been a trade that has worked very well over the past 4 months. This is a very simple income strategy if you are long the stock. It appears that this trade is still intact going forward.
ILMN has been trading in a range since its breakout in mid-October 2014. The stock has pretty much been stuck in the $185-$205 range with closes near option expiration almost always around $195.
I have been selling monthly calls that yielded 3.5%-4% monthly starting with the November expiration and I am still holding my stocks having pocketed in the meantime a nice 15% return. The only attempt to break out of this trading range happened on 1/28 when the stock reversed lower after touching a 52-weeks high of $213.33.
I am convinced that Illumina will rise this year and I expect a 25% to 30% return. It is too tempting to pass the opportunity to pocket on some expensive call options however, and if I will be exercised in the future so be it. In the meantime I will keep selling calls and I believe you should too.