InterDigital Inc (IDCC)

[gabeh]

The option seller probably received $1000 a contract, depending when he sold the options. The buyer paid the same abount for the right to buy shares at $40.

If the shares are around $40 on Friday, the option seller may have to pay out the difference between the sp and the strike price of $40 for each share sold. The buyer stands to make that same difference. The buyer will of course be a net loser as he paid $10 per share and will collect $1 per share (the option value) on closing if the shares close at $41. If the shares close below $40, no further money will be made or lost.

So yes, there is an incentive for the seller to have the share price as low as possible, but if one seller sold all the 2000 $40 contracts and the sp is $41 on closing he will lose 10% of the money he made on the sale of those options. Not too bad. He ends up making $9 per share of $1.8 millin on those 2000 calls (or 200,00 shares).

Of course it's the reverse for the buyers and sellers of put options.