IDCC - Takeover Spec Shoots Stock and Vols

Discussion in 'Options' started by livevol_ophir, Oct 4, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    IDCC closed Friday at $30.19, up 2.0% with IV30™ up ~16%.

    <img src="">

    On 9-23-2010 Barron's listed IDCC as one of many potential takeover targets.

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    The company traded over 17,000 options on total daily average option volume of just 1,349. All but 1,420 contracts were been calls yielding an 11:1 call : put ratio. The action was in the front month 30, 31, and 32 calls with substantially buying interest. The Stats Tab and Day's biggest trades snapshots are included (<a href="">in the article</a>).

    The Options Tab (<a href="">in the article</a>) illustrates that the calls were mostly opening (compare OI to trade size). The Oct 32 calls (the furthest OTM of the bunch) traded the heaviest. Also note that the vols for each month went up substantially (top of image) from the buying interest, with Oct rising the most.

    The Skew Tab snap (<a href="">in the article</a>) illustrates the vols by strike by month.

    <img src="" width = "550">

    This is a great skew chart for Oct (red line). The Oct options are totally backwards in terms of skew. It's a straight upward sloping line, the total opposite of "normal." To read why skew exists, what it is and what "normal" looks like, you can click <b><a href="">Here</a></b>.

    Finally, the Charts Tab (6 months) is below (<a href="">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

    We can IV30™ has ripped past the short term and long term historicals as of Friday. We can also see the remarkable upward swing in stock price of late from the low/mid 20's to now over $30.

    The takeover frenzied market of late points to the the potential of a substantial and lasting bull market. M&amp;A activity is often used by traders as a sign of what's to come. We'll see...

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews, charts here:

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