Wednesday, July 20, 2011

Illumina (ILMN) - Calls Trade Ahead of Earnings

ILMN is trading $71.69, down 0.7% with IV30™; up 7.4%. The LIVEVOL® Pro Summary is below.


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Illumina, Inc. (Illumina) is a developer and manufacturer of life science tools and integrated systems for the analysis of genetic variation and function.

The company has earnings due out on 7-26-2011 AMC (so, next Tuesday). A call buyer stepped in today in the ATM calls in Aug. Specifically the Aug 75 calls have traded 5,587x. Overall the company has traded 7,440 contracts on total daily average option volume of just 1,778. Calls have traded on a nearly 4:1 ratio to puts. The Stats Tab and Day's biggest trades snapshots are included (below).

We can see the total OI in calls I 10,049, so the 5,500+ today are quite sizable if they’re one-sided. Let’s turn to the Skew Tab.

I’ve highlighted the Aug 75 calls. We can see a slight kink up in vol to that line, but in general, the skew looks very normal – even pretty. Unfortunately, that lack of movement in the skew reflects proper price discovery and that means limited trading opportunities to skew.

Let’s turn to the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

Most notably we can see the IV30™ is elevated to the historical measures. Some elevation is normal as earnings are approaching, but we can see the implied tends to trade above the historical for this stock during even non-earnings cycle times. In English, the option market reflects elevated risk in this stock almost perpetually (or at least for the last six months).

Finally, let’s turn to the Options Tab.

I’ve highlighted the Aug 75 calls – where the buyer stepped in. The OI is 736, so these are likely substantially opening. I wrote about this one for (OptionsProfits), so no specific trade analysis here. I will say that the skew hasn’t shifted much (or we missed the shift) and therefore there aren’t any obvious spreads to skew.

This is trade analysis, not a recommendation.

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