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Strategies & Market Trends : The Rational Analyst -- Ignore unavailable to you. Want to Upgrade?

To: Scott H. Davis who wrote (1705)10/26/1999 10:29:00 PM
From: HeyRainier  Read Replies (1) | Respond to of 1720
 
In merger arbitrage, you go long the stock that is being acquired, and simultaneously short the company stock that's acquiring the issue. Given the terms of the acquisition, your expected return should roughly equal the spread between the buy price and the quoted price of the stock.

Understand though that your risk comes from the potential for the deal to fall apart, or the terms of the deal changing.

Also, options need not be involved.

Rainier


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