InterDigital Inc (IDCC)

[ed_ferrari]

song -- you are correct that buying calls and selling puts are 2 ways to bet on IDCC's share price going up. If you sell puts, you are taking a chance that you will be forced to buy shares at whatever strike price the contract is for. For example, if you sold puts with a strike price of 20, and if IDCC's share price goes down to 18, the person who bought the puts would be able to sell you shares at $20. If, however, IDCC's share price stays above $20, you get to pocket the premium since the puts will expire worthless. So the advantages are that if the share price goes up, you get free money via the premiums, and you potentially get to pick up shares at a lower price if the share price drops a reasonable amount. The disadvantage is that if the share price drops alot, you have to pay a higher price for the shares.

With calls, you also specify a price at which you are willing to buy the shares at, assuming the share price will be much higher than the strike price. So if you buy calls with a strike price of 20, and the share price goes up to 30, you can buy the shares for 20. However, if the share price drops below 20, you will end up eating the premium. The advantage to buying calls is that your profit potential is infinite. The disadvantage is obviously that if the share price doesn't rise, you end up throwing money away.