what strategy to use on IDCC?

[gsb2006]

Hi,

with the following case scenario, could you please let me know what would be the best strategy to use?

Here we go:

IDCC (Interdigital Communications) has some great numbers (per my analysis with Investools - or "IT") and is one of the top performing stocks (according to technical analysis) in the top performing industry (Technology/Communications Equipment or .TCE) -- per IT.

It's been on a short uptrend since the middle of July and currently sells for $35.76 (US).

Now, tomorrow is Q3 release and it seems it has had some nice rallies on Q release date (this year).

It's shown 2 big jumps on the first two Earnings releases (from $18 to $24 at the end of January 06 and from $22 to $29 at the end of April), but it has shown a steep downturn on Q2 announcement at the beginning of July (from $36 to $25). Then it slowly went back up again (over 4 months) to $36.

Over the last 4 years it's seen the following changes (on Q3 announcement):

in 2005 there was a minor change (bet. $17 and $20).

in 2004 it jumped from $16 to $22

in 2003 it moved from $16 to $20 (declining sharply from $25 to $25 on Q2 Earnings)

in 2002 it jumped from $8 to $20 (again on Q3 announcement).

With these trends, do you think it will jump high tomorrow or it will sink down?

What would be the or a strategy to use to take advantage of either move? Will that be a spread?

A Nov. $35 call is going for $2.15 while a Nov. $35 put is selling at $1.30.

Will buying both be a good play?

I'll need to move about 3.5 points in either direction to make it a profitable trade, correct?

In advance, thanks for your help.

Best,

GSB

 

[gsb2006]

Here's more on the current status of IDCC:

"IDCC: Volume Spike; 86% > 20-adsv, Stock -0.64%
10/31/2006 15:10
This is the 1st VOLUME alert for IDCC in the past 7 calendar days.

Trading for Interdigital Communications Corp (NASDAQ NM: IDCC) has been heavier than usual in today's session. By 17:10 ET, the stock had already traded 1,334,600 shares via 1,664 trades. The cumulative volume is 86.47% above its 20-day average of 715,710. Normally the stock experiences around 959 individual trades per session.

So far, today's volume surge has caused a net decline in IDCC's stock price. At the time of this alert, the stock was trading at $35.760, down $-0.230 (-0.64%).

Eleven months ago, the Company's shares closed at $18.890. The price has gained more than 89 percent since then.

Over the last 10 trading session IDCC has traded in a range between $34.800 and $36.910 and is currently trading 3.12% below its 52-week high of $36.910 set on October 27,2006 and 107.30% above its 52-week low of $17.250 from December 20,2005.

In the previous 3 sessions, IDCC trading has displayed a mixed trend. Closing results have been as follows:

October 30, 2006 --- closed at $35.990 down $0.300 (-0.83%) on 636,000 shares
October 27, 2006 --- closed at $36.290 down $0.580 (-1.57%) on 734,700 shares
October 26, 2006 --- closed at $36.870 up $0.900 (+2.50%) on 952,900 shares

The Company last released news on October 31, 2006 (today):

"InterDigital to Vigorously Oppose Samsung's Attempts to Vacate Arbitration Award"

INTERDIGITAL COMMUNICATIONS CORP
InterDigital Communications Corporation specializes in the architecture, design and delivery of wireless technology and product platforms. The Company develops advanced wireless technologies and products that facilitate voice and data communications. In conjunction with its technology development, the Company has assembled an extensive body of technical know-how, related product embodiments and a broad patent portfolio of Time Division Multiple Access (TDMA) and Code Division Multiple Access (CDMA) patents, which its licenses worldwide. The Company markets technologies and solutions primarily to wireless communications equipment producers and related suppliers. These solutions are embedded into products targeted for the following wireless telecommunications applications: mobile phones, personal digital assistants, mobile computing devices, other terminal-end wireless devices, base stations, and other infrastructure equipment."

© 2006 Knobias (Source)

The news they talk about it's just about another company not wanting to pay royalties to IDCC per a 2005 ruling.

 

[damianoakley]

Hi,

IDCC is an excellent stock. Yesterdays price movement suggests possible further upward movement from here.

Thanks

Damian

 

[timsk]

Hi,
IDCC is an excellent stock. Yesterdays price movement suggests possible further upward movement from here.

Hi Damian,
Would you care to chuck up a chart with some notation to expand upon the above, please?
Cheers,
Tim.
(P.S. I've not had a chance to look at the chart at the time of posting.)

 

[gsb2006]

Thanks Damian.

 

[damianoakley]

Hi All,

I would not be getting involved in IDCC after today's failure of the stock to break into new highs.

I would have considered this stock if the strong fundamentals of the company would have pushed the price up through $37, but today's chart makes this a definite no-go area for me. My only concern about this stock technically after yesterday, was that my indicators were showing that this stock was not being accumulated - it was neutral. That, combined with the stock's failure to make a new high has definitely kept me away. A better stock in this industry that I've been involved in since 12/10/06 and built multiple long positions in is DTV.

Yesterdays "tail" on the IDCC chart suggested that there might be some upward movement today, but instead there has been a massive sell-off. I would be staying well away from this one for now.


Thanks

Damian

 

[gsb2006]

The day started with a sharp turn to $33 (from $35.76 at closing time yesterday).

I had placed a straddle for a $35 call/put for 3.25 limit before the market opened.

As the stock was going down immediately upon opening, the order (at limit) did not get filled and I cancelled it.

Since the stock was staying at about $33 for most of the time, which was far from either the $35 or the $30 options I just stopped watching it.

Should I had properly entered the $35 call/put play (NOT at limit), with the put now going for $4.8 I would have made $155 per contract by now.

But oh well. We live, we learn. (When it was staying at $33 I was thinking I had saved myself some money.)

 

[gsb2006]

Now, what do you think about another star .. Guess (or GES)?

Q3 release for it is today at closing time (4:30 pm EST).

I'll check its past performance. (Right now is doing great.)

 

[gsb2006]

Per it's past performance (GES) it seems it takes sharp dives on Earnings releases.

On Q2 announcement, August 2, 06, it went down from $51 to $39. It's been uptranding ever since -- $39 to about $56.5 today.

On some good news it went up (at end of May) from $42 to $45.

On Q1 it went down from $48 to $39.

On Q4 05 (mid. Feb. 06) it went down from $48 to $36.

I am betting (bot 1 GES Nov $55 put at 1.8) it will go down by at least 5 points.

 

[gsb2006]

buying a $55 call will be a bit too much money on the play (3.6 per share.

 

[damianoakley]

GES - a strong stock that seems to have better technicals (at a quick glance) than IDCC.

I will have look at this properly after the close today.


Thanks

Damian

 

[gsb2006]

Yes. And it seems like it did go up on Q2 announcement (from $42 to $48). It stayed around $48 for a while and towards the end of August it dove to $39. It went up from there (to $56 today).

I am still thinking it will take a dive. We'll see.

 

[gsb2006]

It went up again (to $65 in less than 1.5 hrs). I should have used a $55 straddle.