Tuesday, July 19, 2011

InterDigital (IDCC) - Elevated Vol Portended Company News

IDCC is trading $51.21, up 23.4% with IV30™ down 4.9% as of ~10:30am EST. The Livevol® Pro Summary is included 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.

The news driving the stock surrounds a potential sale. Here’s a news snippet:

InterDigital Inc shares rose 29% in pre-market trading on Tuesday morning after the board of directors said that the wireless technology development company was exploring a possible sale. Terry Clontz, chairman of InterDigital's board of directors said that the value of intellectual property in the mobile industry had risen "substantially" in the past year, making it an appropriate time to explore strategic options.
Source: MaketWatch, by Dawn Lim

The reference to the IP valuation is in reference to a news story that came out on 7-1-2011 regarding Nortel’s (NRTLQ) patent portfolio sale. Here’s that snippet.

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).
Source: Provided by Briefing.com (www.briefing.com)

The news today has popped the stock substantially, while vol is actually dropping. The Livevol® Pro Stats Tab is included below along with the largest trades on the day.

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

We can see the pop on 7-1-2011 on the Nortel news, and of course we can see the pop today on IDCC’s news. It’s interesting to note that the IV30™ was elevated since mid-May. This was actually vol I sold last week for a one week bet.

Let’s turn to the Skew Tab to see line-by-line vols in Aug.

While there’s some unevenness to the downside, the skew does show a normal shape in that the downside is bid up relative to the upside. The 41, 38 and 36 puts seem to have a vol spike relative to the surrounding strikes.

Finally, let’s turn to the Options Tab for completeness.

I wrote about this one for TheSTreet.com (OptionsProfits), so no specific trade analysis here. I do make note of the price level IDCC was at before the first news of the Nortel patent sale (so, 7-1-2011).

This is trade analysis, not a recommendation.

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