Has anyone thought about selling SDLI puts right here? I've been looking at the Dec 360s selling at about $82. I'd go for an even higher strike if they had one because I'd want to make sure I ended up with either SDLI or JDSU stock at expiration. The last thing I'd want is for JDSU/SDLI to blast right through the strike and leave me with only the option premium. The bottom line is I want the stock and this sounds like a good way to get stock, get the option premium, and get the discount in the SDLI stock price.
I was reading about everyone's arb plays last night and thought I'd give it a try myself. I'm not really sure what my intentions were but deep inside I think I still wanted my JDSU stock. But anyways, near the open this morning, I sold all of my JDSU at $101 and bought SDLI at $323 1/4 when the discount was still about 19%. At about 2pm when JDSU was sinking like a pig, I sold SDLI at $318 1/4 and bought back my JDSU at $96 1/8; the discount had dropped to about 15%. Since I had 3.5 to 1 JDSU shares to SDLI, the trade/gamble worked out nicely. I know I'd be better off having kept the SDLI shares assuming the merger does go through but somehow having JDSU has been like a security blanket these past few months. I'm still considering that put play though and would like opinions on it.
I'm just curious how many of you that were holding SDLI on Friday are actually happy w/ the merger? I'm sure when y'all got up Monday morning and heard the news, it must have seemed like the best thing since sliced bread. After a 2 days of trading and a net of about +23 pts, is it still a great deal for SDLI shareholders?
I myself tend to think SDLI would have hit $350 at least this month w/out the merger. Now with the merger, SDLI is likely to underperform the pre-merger juggernaut we have all come to know. Sitting here typing and looking at the Naz futures +62, I think SDLI would have been higher tomorrow w/out this merger.
IMO, had this merger been a $30B deal instead of a $41B deal when it was announced, both JDSU and SDLI would be higher today. More importantly, the boys on Wall Street woudn't be crying over the sticker shock and in all likelihood would be scooping up shares of both companies left and right. Now, the stellar earnings reports that both companies will announce in a week or two, will have almost no effect on the stock price of both companies. The only thing Wall Street is concerned about right now is the $41B price tag.
It's a shame that a company that will no doubt become the CSCO of 1995, may very well be left at the station when the Naz Express leaves tomorrow. I suppose in a year or two, the $41B price tag will be forgotten and all of us JDSU/SDLI shareholders will be happy as can be. But right now, something just doesn't feel right.
I'm not upset at the $41B JDSU is paying and for all I know this may turn out to be the steal of the century. What I am saying is that Wall Street doesn't like the deal, right now anyways, and that's the only thing that matters. Both JDSU and SDLI shareholders will suffer in the near term but there's nothing any of us can do about it. We are now officially hitched at the hip and whenever JDSU says come hither, SDLI is sure to follow. |
