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• L-3 Communications breaks key level
• Unusual ITT play exploits industry panic

• ILMN 100% Rate It

Illumina says it's undervalued, and one big investor agrees.

optionMONSTER's Heat Seeker tracking program detected the purchase of about 3,600 September 52.50 calls for $1.55 and the sale of an equal number of September 36 puts for $1.60. Volume is more than 25 times open interest at both strikes.

ILMN is off 0.68 percent to $43.60 in afternoon trading. The maker of genetic-testing systems gapped higher in January after Roche offered to buy the company for $44 a share.

Management rejected that foray, and a second bid for $51. The offer expired last week and the stock proceeded to lose about 15 percent.

Since falling, however, ILMN reported better-than-expected earnings and revenue. The stock is attempting to hold the same level where it peaked in late September and stay above its 200-day moving average. (See researchLAB for more)

Today's option trade is looking for a rally back to the recent highs from when the bid was still on the table. It resulted in credit of $0.05 and stands to earn infinite profits if ILMN rallies.

The position is similar to owning shares because it can lose money to the downside. Unlike stock, however, it will track ILMN less closely as time passes and expire worthless if the shares remain between $36 and $52.50.

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