What's behind InterDigital call selling
InterDigital has been running higher since reporting earnings results last week, but a large option trader apparently believes that any further upside is limited in the wireless-technology company.
A trader sold 4,000 December 47.50 calls for the bid price of $0.50, according to optionMONSTER's tracking systems. Open interest in the strike was a mere 6 contracts at the start of the session, so this is clearly a new position.
IDCC rose 7.04 percent yesterday to finish at $40.77, its highest close since gapping down from $46 in January. The rally adds to gains of the previous two days, which took the stock up from $34.
Yesterday's call selling sees more potential upside for the stock, but not beyond the $47.50 strike price. These options could have been sold naked with an initial bearish bias, or they could have been traded against an existing long position in a covered call strategy. The latter would be bullish up to the strike but gives up any upside in the stock beyond that. (See our Education section)
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