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Technology Stocks : Compaq
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To: Jerome who wrote (95889)3/10/2002 11:35:00 PM
From: Night Writer   of 97611
 
Jerome,
Professional Arbs make their money on the spread between the two stock prices. They could care less about where the prices go after they take a position. They would short 6,325 HWP shares for every 10,000 CPQ shares they buy. They put the difference (spread) in their pocket and cover the HWP short with 6,325 HWP shares (10,000 converted CPQ shares) after the merger. The arb's risk is that the merger doesn't happen.
NW
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