Options Trading News

December 26, 2012  Wed 9:34 AM CT

InterDigital is down so far this month, and one investor thinks it may continue to drop.

optionMONSTER's Depth Charge tracking program detected the purchase of 2,000 January 41 puts against open interest of just 63 contracts. The initial blocks priced for $1.15, followed by the majority of the volume at $1.20 as the buying pushed up premiums.

Puts lock in the price where investors can sell shares in the technology company, which makes money by licensing wireless patents. If it falls those puts could appreciate in value, so they may have been purchased by an investor who owns the stock and wants protection against a push to the downside. (See our Education section)

IDCC is up 1.1 percent to $42.42 in morning trading. It rallied almost 90 percent between mid-June and mid-December but has been skidding lower since then. Given those big gains, some investors may now expect profit taking, which could help explain today's activity.

Total option volume is triple the daily average in the name, according to Depth Charge. Puts outnumber calls by a bearish 17-to-1 ratio.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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