Tuesday, February 7, 2012


This is what happens when the sirens call and no plan is in place.   IDCC was a take over candidate after  it announced it was on the auction block.    The announcing of the auction, bid up to massive levels.    The Nortel patent auction recently obtained around a $5 bid.    Commentators were saying that IDCC portfolio was better and it could fetch higher valuations.  Common consensus at this time indicated around $118 a share.     In other words, a huge profit!!

Looking at the chart, there appeared to be a base forming.

Position initiated on 8/11/11
Chart at time of the initial position

Bought s at 70.51 and again at 68.10  I increased my position as I got caught up in the bullish move and doubled the position.  

It appeared to work.
Within days IDCC ran up to 76.82,  meaning I was up to a $751.5

It was a wild week,   I had a big run up and then NEWS!  Google announced that it was buying Motorola for 12 Billion.    Google was perceived as the best potential bigger and IDCC got smacked.

The next day it traded as low as 58.38. but within days backed over 70.  I held on.   Over the next few months it was a bumpy ride but definitely a ride lower.  IDCC appeared to be making a base in the 40s.

   I never should have been holding a stock that I bought in the high 60s in the 40s.  I knew better but I did it anyway.  I thought that there would still be a buyout.   I sold a bull spread.   March 44C for $4.00  and bought the 48 for $1.90 ($1.10 credit)  The thinking was is there was a buyout my long stock would effectively turn the spread into a 1X2 backspread.

Then IDCC announced that it had failed to find a buyer for the whole company and the stock gapped from about 45 down to 37 in AH trading.   I doubled down.

Its usually not a good idea to double a losing position.    I viewed the additional shares as a different trade.  I like the gap fade trade.  Idcc then traded down to $35.   In retrospect, even from a gap trade, trading in AH was a mistake.  I should have waited until the open the next morning.

I also sold off the 48 march calls for whatever I could get for them, which turned out to be .30.    I decided to hold the 44 short calls.

But as I suspected the big move would put in a bottom, and Idcc began to trade up.   Then the company announced that it missed revenue.    There was another gap down.  I thought it would be possible that it would trade up from there on the theory that the previous gap flushed out all of the sellers.  For a while it looked like that might happen but by the afternoon it started to trade lower again.

I decided to finally throw in the towel.  Sold 1/2 @37.65 and 100 @ 37.58.   I also closed out the short calls for .69.

Chart when position was closed
What an ugly ride down.

  I broke the Rules repeatedly and I paid.   This trade along with Alexander  Elder's book is the reason I started this blog.  I want to be able to assess why positions are taken and take detailed notes through the process.

No comments:

Post a Comment