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Strategies & Market Trends : Arbitrage Plays
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To: Allen Furlan who wrote (219)4/27/2000 3:12:00 PM
From: debrahaugen   of 376
 
Re: Your question of how I played the Coms/Palm arbitrage position.

I simply shorted Palm through a british brokerage firm, when the SEC allowed the shares to trade in the US. I was traveling in England at the time, and there was no problem with finding available Palm shares. Unfortunately, with the popularity of the arbitrage, the available shares dried up fairly quickly.

I have since covered my short in Palm at around 29.00 per share (Stopped out while traveling).

Perhaps very foolishly, I did not sell the Coms position, but instead increased my position in Coms quite substantially. I have increased my position in Coms by 20% at 40, 38 1/2 and 37 (60% in total), on the belief that the long term future of Coms is attractive in the intermediate future (or quicker time period if the market rallies earlier than the fourth quarter of this year).

I plan to increase my position in Coms every 1 1/2 point down to as low as the 25 level. Unless the fear of self preservation gets the better of my current game plan!

From small arbitage profit to pure outright speculation. Sometimes I wonder...especially when you make the very very valid point that a large distribution of Palm shares to Coms shareholders could have a negative effect on the stock price of Palm.

If I was starting the play anew...Options might be a better way to limit the downside...but right now the die is cast...and I am off to Tahiti for two weeks with a stop at 25 (god forbid)...and the market gods will decide???
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