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Strategies & Market Trends : Arbitrage Plays
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To: Paul Senior who wrote (163)2/2/2000 6:04:00 PM
From: Allen Furlan   of 376
 
Paul, I didn't communicate my point very well. The chart on page 7 refers to average share price. If the shares of fnf go into decline the average price over 30 days will be higher than the final price. But you will get 1.255 shares which you will have to sell at the final price. One way to protect yourself in a declining acquirer is to pre sell the shares, assuming you do not want to hold the position. This means going short in fnf over several trades during the 30 day price setting period. Or as I prefer to sell fnf calls as a partial hedge. I did this with my may/znco position but may went up so my opportunity to have increased returns was lost. Same could be true for ctz/fnf if fnf rises. Also is fnf goes up to final price of, for example, 16, then the average price could still be less than 15 and the reduced merger consideration could still come into play. In any case I added 400 shares to my ctz position today because I have gut feeling that fnf will do right by the Kirby family.
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