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Strategies & Market Trends : Arbitrage Plays
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To: Allen Furlan who wrote (266)10/24/2000 7:35:53 AM
From: Mark Ivan   of 376
 
Allen,

I'm not sure I follow you. Buy PUTS on which side? The acquirer or the acquiree?

At any rate, puts present 3 problems:

1. You are holding a wasting asset until the deal goes thru. Unless you buy deep in the money puts, you'll lose time value.

2. You can't effectively match up the arbitrage because of the of the odd lots the deal presents. If TGP is giving 1.37 shares of PCL, you'd need to buy 13,700 shares of TGP and buy 137 put contracts on PCL to get the math to work out. Most do not have that capital.

3. Not all stocks are optionable.

Mark
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