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Technology Stocks : JDS Uniphase (JDSU)
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To: Gut Trader who wrote (11504)7/19/2000 10:26:32 PM
From: Winston Lee  Read Replies (3) of 24042
 
The x factor is what will the arbs do? My guess is that they'll start to cover their billions shorting JDSU and sell their SDLI, as their risk has increased substantially now. If they were perfectly hedged, they would make about 19.5% from their arbitrage position over about 6 months - assuming the deal goes through. However, now with price of SDLI soaring, if the deal does not go through, SDLI may lose 100+ points in 1 day - not to mention the possibility that JDSU may actually soar. Is this a risk that they are comfortable keeping on their books? Making 19% over 6 months is not that good if they assume high level of risk.

If I weren't so loaded with JDSU I'd be buying more at the open tomorrow.
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