InterDigital (NASDAQ: IDCC - option chain) shares opened higher today after the company announced it has resolved its patent dispute with Samsung Electronics Co. Under the agreement, IDCC has granted Samsung a license that covers 3G wireless handsets through 2012. The license allows IDCC to collect royalties from Samsung. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on IDCC.IDCC opened this morning at $28.10. So far today the stock has hit a low of $25.35 and a high of $28.98. As of 12:35, IDCC is trading at $28.98, up 0.29 (1.1%). The chart for IDCC looks neutral.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $15 range.
A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverages nice returns. For this particular trade, we will make a 4.2% return in just two months as long as IDCC is above $15 at January expiration. IDCC would have to fall by more than 42% before we would start to lose money. Learn more about this type of trade here.
IDCC hasn't been below $16 at all in the past year and has shown support around $20 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in IDCC.
Entrepreneur's Journal: Putting together a solid sales contract
The week in preview: Earnings from Walmart, Macy's, and other retailers
Six top trades for the rest of 2009
