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Non-Tech : SPIN-OFFS "secret hiding places of stock market profits"
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To: Terry Maynard who wrote (237)6/7/1998 7:24:00 PM
From: Stewart Whitman   of 1185
 
Terry,

The other thing I was thinking for SAMC - which is just simple arbitrage - buy say 1000 shares @ $29, and 4 x 22.5 puts @ $3.75. Tender all the shares. Assuming 59% (say 600 shares between friends) are accepted, then, use the puts to sell remaining 400 shares.

Paid:
Shares: $29,000 (1,000*$29.00)
Puts: $1,500 ( 400* $3.75)
---------------
Total: $30,500

Recv:
Tender: $24,000 (600*$40.00)
Opt. Ex: $9,000 (400*$22.50)
---------------
Total: $33,000

That seems to be the worst case (assuming the tender goes through, of course) and gives a little more than 8%. Of course, you might get lucky and sell more shares at $40 if more people wanted to keep shares (that's just upside).

It looks like, the put options are priced like they expect the resulting price to be around $18-$19 and not $13.

Stew
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