Greg, When you sell a stock short, somebody pays out real cash for the stock you short. Somebody earns interest on that cash and it should be the guy taking the risk, the short seller. In most cases, the brokers simply take it and tell the customer to take a hike. But you can negotiate a short rebate if your account is important enough. Generally, you should get 70-85% of the money market rate.
I like the paired trade because the irrationality hits both stocks, and, in this case, Ancor has the better news flow. Deals with Sun, a better product, etc. It is the irrational markets that make paired trades viable. But, I like the rebate to pay me for waiting for balance to resume.
I don't know Beam/Visx, but my long term paired trade of Intel/Motorola was one of my biggest winners of this decade. And my long Exxon/short Texaco trade during the Bass Brothers' greenmail run in the 1980s helped make my reputation in hedge fund circles. But it is not a risk free situation and you have to figure all the angles and hope for the best. Sometimes it is better to pair the options instead of the stock, especially in takeover situations. |
