Tuesday, July 12, 2011

InterDigital (IDCC) - Elevated Vol to Wings in Front

IDCC is trading $43.25, down 1.8% with IV30™ unchanged as of ~10am EST. The LIVEVOL® Pro Summary is below.


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InterDigital, Inc. (InterDigital) is a holding company, and its various subsidiaries engage in technology research and development activities or in the prosecution, maintenance, enforcement, and licensing of patents.

Let’s turn to the Charts Tab (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 popped on 7-1-2011 on news of a patent sale from a competitor. A snippet from that story is included below:

7-1-2011: Interdigital Comm trades up 11% in the pre-mkt; strength attributed to Nortel patent portfolio sale
Last night, as part of its bankruptcy proceedings, Nortel (NRTLQ) concluded the auction of all of Nortel's remaining patents and patent applications. After a multi-day auction, a consortium emerged as the winning bidder with a cash purchase price of US$4.5 billion. The consortium consists of Apple (AAPL), EMC (EMC), Ericsson (ERIC), Microsoft (MSFT), Research In Motion (RIMM) and Sony (SNE).

Although IDCC was not directly involved in the Nortel deal, it does generate the majority of its revenues through the licensing of patents.
Source: Provided by Briefing.com (www.briefing.com)

Since that stock pop, the price has trailed off, losing more than $2 in twelve calendar days. The vol has remained elevated in lock-step with the price decay.

Let’s turn to the Skew Tab.

The large(ish) stock moves of late have pushed the vol in the wings (OTM options) in Jul as tail risk remains high.

Let’s turn to the Options Tab to make a trade.

I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here.

FULL DISCLOSURE: I hold a short vega position in IDCC

This is trade analysis, not a recommendation.

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