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Strategies & Market Trends : Arbitrage Plays
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To: Allen Furlan who wrote (184)2/25/2000 2:59:00 PM
From: Q.   of 376
 
I closed out my AMAT/ETEC pair arbitrage for a nice gain of 51% CAGR.

A couple of weeks ago, ETEC was selling at a $4 per share discount to the price implied by the takeover (at 0.649 shares of the acquiring company AMAT for one share of ETEC).

In the last couple of days, this discount shrank to less than a dollar, even though there has been no news and no proxies filed yet for shareholder votes. So I closed my position.

Net of all trading costs and the cost of insuring my position with options, my return on capital was 3.5% in 25 days, or a CAGR of 51%. Not a great killing, but very easy.
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