Replies to post #326471 on InterDigital Inc (IDCC)

[AMCJAX]

Own a truck load of Jan 2012 and Jan 2013 calls, 45's and 50's and 60's and 70's.....not too worried anymore ; )

(bought them when we were in the high 30's to mid 40's)

[nicmar]

Count.. I don't know. I get confused on the options thing as I've never bought or sold any of them, but take Joels case. He spends $1000 for the right to purchase 1000 shares. If IDCC doesn't sell, the share price drops to $35 and Joel loses $1000.

Now say Joel doesn't go for the put and call stuff so he buys 1000 shares at $71.00, todays price and the cost is $71,000. If IDCC doesn't sell, the share price drops to $35.00 and Joel loses $36,000. Say what? Maybe a lousy $1000 is not too bad a risk at all as I lost many times that in paper amount just today. mo.. nic

If you want to gamble, that's fine, but be aware of what you are doing and don't gamble money you can't afford to lose.

Good post and I agree with most all of it, but as you say, the above scenario does make options awfully enticing. Again, mo.. nic

[jmspaesq]

Count:Absolutely I agree, options are risky, and they can expire worthless unlike purchasing the underlying security. It depends on them hitting during the time frame of the option. Which is one reason I am going to do a spread of options; I'm willing to pay a little bit more for the time value in the Dec and Jan calls at the same (or slightly lower) strike prices. If this doesn't play out by September 17, then I will have a few more months.

Obviously my first bet on the Sept 17 options is a bet that this will play out before then--it might not be a done deal but I would guess there is a tender offer sooner rather than later and my GUESS is in the next ten days. I also guess that a bidding war will ensue.

One options play that makes a lot of sense to me is this. My friend had purchased a few hundred shares years ago in the 20s (not the 1920s--I mean in the mid $20 range). He sold some for personal financial reasons. He has 100 shares remaining. For him I think it makes sense to sell the stock, pocket $50 a share and then take 2-250% of the profits and put it into options--let's say he can buy options for 1000 shares for approximately that amount, maybe he pays a little more for the time value of a Dec or Jan call.

He is playing on house money now. He then has leveraged his potential gains by 10X in terms of now he has the right to buy 1000 shares instead of holding 100 shares. He hedges his downside risk and loses only the difference between $75 a share (approximate) and 105 but has 10x the potential gains that he had with 100 shares, on the upside of 105+.

If the options expire worthless he still has 75-80% of his gains in his pocket off the table. And IMHO if they expire worthless it is because the deal fell apart and he got out when the getting was good. Or perhaps the deal is at $75-100 a share so he loses out on that profit on the hundred shares.

Pretty much he doesn't get hurt he pockets gains and has the potential upside which could be large or HUGE.

I'm not advocating this options strategy for anyone but me (well I think it is a good play for my friend, a I have discussed it with some other friends). Anyway I'm not telling others to do this, and everyone needs to make their own decisions.

PS thanks for the nice comments too, I'm blushing a bit! And my 100 (or 200) to 1 hoped for result would be a great outcome. I also took into consideration my analysis that the 105s will be in the money even if the tender is $115 which IMHO is a bargain basement absolute minimum--so I sure think there is not much downside, and like I said I'm hedging the time value issue but buying some further out paying a small premium for the additonal time.

Anyway I hope this works out for me and if it does it will work out for ALL longs including those who make no options move, just hold their existing shares.