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Call Players Swarm Illumina Ahead of Front-Month Expiration

With quarterly earnings also looming, call activity spikes on ILMN

by 4/16/2012 1:30 PM
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Reluctant takeover target Illumina, Inc. (ILMN - 44.83) has been the focal point of some bullish attention today, as roughly 30,000 calls have changed hands, nearly tripling the equity's expected intraday volume. Most popular has been the out-of-the-money April 50 strike, where 8,400 of these calls have crossed. Digging deeper into the data, it appears that a block of 3,800 calls was purchased at this strike, while an equal number of calls were simultaneously sold at the April 55 strike. This activity could be signaling the initiation of a bull call spread on ILMN.

Despite today's jump in call activity, the biotech firm is certainly no stranger to bearish speculation. Although short interest on ILMN edged down by more than 2% during the most recent reporting period, these bearish plays still account for a hefty 21% of the equity's available float. It would take over eight days to buy back these shorted shares, at the stock's average pace of trading.

On the technical front, ILMN has advanced by more than 47% year-to-date, and has bested the broader S&P 500 Index (SPX) by over 23% during the last three months. Currently, the stock is clinging to its 200-day moving average, a trendline that has not been breached since mid-January.

It should also be noted that ILMN is scheduled to reveal its first-quarter earnings on April 23, and has topped analysts' bottom-line estimates in three of the past four quarters. At last check, however, the equity is off by about 5% to trade at $44.83.


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