radames:
My position was 100% arb - short the aquirer and long the aquiree. However, I began playing with 20% of it on Tuesday. Remember, ONLY 20% of it - the rest is simply an arb play to capture the two month max 14% spread on the merger.
On Tuesday, I sold COVERED XCIT Nov$170s for $49 1/2 when the stock was almost $180. At the same time, I bought an equal amount of ATHM May$180s for $23. The difference $49 1/2 and $23 was MINE. However, today I covered the ATHM short at $146. So I am sitting on the 20% long XCIT, the ATHM calls, and waiting for a) it to go back up and sell the ATHM calls or b) wait for it to go down and buyback the XCIT calls for much less (those $49 1/2 calls Tues are $32 today!). If ATHM gets back up there and I am able to bail on those calls for even $15 (they are $9 now), then I will just sit patiently and be called out of the XCIT for 57% profit. Yea, I know "only" 57%, but I am having a blast. Ideally, ATHM takes a big dump here, I buy back the XCIT calls for cheapo and we rebound hard before May into which I will sell the ATHM calls.
PS. I would NEVER short net stock without being 100% hedged! |
