Tuesday, November 9, 2010

InterDigital (IDCC) - Vol Pop, Skew Shift, Rumors

IDCC closed yesterday at $36.61, up 6.6% with IV30™ up over 23%. The LIVEVOL™ Pro Summary is below.


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The company traded over 18,000 options on total daily average option volume of just 2,835. Calls traded on a 10:1 ratio to puts, with the June 40 calls trading over 5,000x. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action in the front two months. The June options had OI of just 599, so they were opening. Note also that Nov vol was up 15.7 points or ~45% and the back months were each up ~ 6-7 points (other than Jan'12).

The Skew Tab snap (below) illustrates the vols by strike by month.

An awesome skew. The front two months mimic each other perfectly in shape, bent to the upside, with the many of the OTM puts in Nov no bid. Note the offset in the lowest vol strikes; Nov 36 calls are lowest vol in Nov, while Dec 34 calls are the lowest vol in Dec. Hmm...

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

We can see the stock has steadily climbed over the last few months and then catapulted higher on good earnings. On the vol side (bottom), we can see the IV30™ exploded yesterday.

Possible Trades to Analyze
1. The Dec 34/Nov 36 call spread for less than $2.00 is one play - that's a pure skew play in vol with a delta bet (i.e. a bet the stock goes up after Nov, but goes down below $36 within the next two weeks). If done for less than $2.00, then there's no upside risk if the stock stays here in Nov.

2. Look to see if the vols comes back to the puts, some 1x2 put spreads for a credit could be an interesting play if the strikes in Nov can be sort of "out of the way."

3. Sell the upside skew in a call spread. Buy lower vol than you purchase in a call spread is a nice treat.

4. For you risky at heart, sell the upside skew naked or in a 1x2. Just duck if there's a takeover...

5. A calendar is in play as well.  Note the vol difference between the front two months.  Oo, tricky. This may be may favorite of the bunch.

This is trade analysis, not a recommendation.

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