I have been monitoring $ILMN for several days as it worked its way up to the Top Rail of a mild Down Channel. I posted a chart in the @StockTwits stream noted in the graphic below:
I started a position on 9/9/2013 and made a adjustment today:
I sold the September 80 Calls for a 2.95 credit
So why do I take this step? There are several reasons that I do this but in this case I wanted protection for a failed breakout – prove to me that it could finally get up & out of this Channel. By selling the premium, I get some nice cushion to work with.
So what happens now? Well there are 2 paths that this trade can take:
1) The stock could churn but stay above $80. I would need to BtC the Calls next week to avoid the position being called
2) The stock could pullback to under $80 by next Friday & I keep the premium collected. This would lower my cost basis. I could then sell October premium to lower it more as a next step.