Call Options in Favor on Rumored Takeover Target InterDigital
Options players are loading up on bullish bets as IDCC bumps along support at $60
9/19/2011 10:23:24 AM
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Keywords: IDCC
Calls were in heavy rotation on InterDigital, Inc. (IDCC - 61.63) last Friday, with approximately 15,000 contracts crossing the tape -- 1.16 times the equity's typical daily call volume. During the course of the session, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) bought to open 3,472 calls on IDCC, along with just 574 puts -- netting the stock a single-day call/put volume ratio of 6.05.
However, Friday's skew toward calls was simply part of a broader trend for IDCC. The equity's 10-day ISE/CBOE/PHLX call/put volume ratio stands at 8.92, as bullish bets have been nearly nine times more popular than their bearish counterparts over the past couple of weeks. This ratio registers in the 88th percentile of its annual range, indicating that traders on these three exchanges have purchased calls over puts at a faster pace only 12% of the time during the past year.
It's worth noting that short interest on IDCC has been ramping up lately, too. The number of shares sold short ballooned by 39.3% during the past month, increasing by 6.7% during just the most recent reporting period. Now, short interest accounts for nearly 18% of the equity's float.
On the charts, IDCC made some major headway over the summer, when media reports suggested that a buyout bid was imminent from a bigger tech company. The stock has since consolidated the bulk of those gains into support at the round-number $60 level -- but, judging by the recent uptick in short interest, quite a few skeptics aren't buying the "white knight" theory.
In this context, the increase in buy-to-open call volume on IDCC could suggest that traders are once again placing their bets on a takeover offer -- or, it could simply mean that savvy bears are limiting their upside risk by pairing their shorted shares with bullishly oriented options on the equity.
-posted by Elizabeth Harrow (eharrow@sir-inc.com)
9/19/2011 10:23:24 AM
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