Is this too good to be true?
Considering to arbitrage between WCOM and MCIC: Short WCOM and use
the proceeds to buy MCIC, even at today's price.
Here is the numbers I understood based on their merger press release.
It indicates the arbitrageurs have the tendence to drive WCOM price
to $29, where they can get max benifit; it also indicats if WCOM
goes above $38 for any reason, the arbs. start to lose money, they
have to close their arb. positions by that point.
WCOM MCIC Exch. Arbitrage
20-DMA Value Ratio Gain/Loss*
$50.000 $62.195 1.2439 -$3,354 *Arbitrage = Short 1000 shares
$49.000 $60.951 1.2439 -$3,287 WCOM @ $30 and Long MCIC @ $40
$48.000 $59.707 1.2439 -$3,220
$47.000 $58.463 1.2439 -$3,153 *G = Nw*P2((P1/P3)*k - 1)
$46.000 $57.219 1.2439 -$3,085
$45.000 $55.976 1.2439 -$3,018 Nw = Number of WCOM shorted
$44.000 $54.732 1.2439 -$2,951 P2 = Price of WCOM's 20-DMA
$43.000 $53.488 1.2439 -$2,884 @ deal close
$42.000 $52.244 1.2439 -$2,817 P1 = Price of WCOM sorted
$41.000 $51.000 1.2439 -$2,750 P3 = Price of MCIC long
k = Exch. Ratio
$40.000 $51.000 1.2750 -$1,750
$39.000 $51.000 1.3077 -$750
$38.000 $51.000 1.3421 $250
$37.000 $51.000 1.3784 $1,250
$36.000 $51.000 1.4167 $2,250
$35.000 $51.000 1.4571 $3,250
$34.000 $51.000 1.5000 $4,250
$33.000 $51.000 1.5455 $5,250
$32.000 $51.000 1.5938 $6,250
$31.000 $51.000 1.6452 $7,250
$30.000 $51.000 1.7000 $8,250
$29.000 $50.999 1.7586 $9,250 <<< Sweet Spot
$28.000 $49.241 1.7586 $8,931
$27.000 $47.482 1.7586 $8,612
$26.000 $45.724 1.7586 $8,293
$25.000 $43.965 1.7586 $7,974
$24.000 $42.206 1.7586 $7,655
$23.000 $40.448 1.7586 $7,336
$22.000 $38.689 1.7586 $7,017
$21.000 $36.931 1.7586 $6,698
$20.000 $35.172 1.7586 $6,379
$19.000 $33.413 1.7586 $6,060
$18.000 $31.655 1.7586 $5,741
$17.000 $29.896 1.7586 $5,422
$16.000 $28.138 1.7586 $5,103
$15.000 $26.379 1.7586 $4,784
$14.000 $24.620 1.7586 $4,465
$13.000 $22.862 1.7586 $4,146
$12.000 $21.103 1.7586 $3,827
$11.000 $19.345 1.7586 $3,508
$10.000 $17.586 1.7586 $3,190
$9.000 $15.827 1.7586 $2,871
$8.000 $14.069 1.7586 $2,552
$7.000 $12.310 1.7586 $2,233
$6.000 $10.552 1.7586 $1,914
$5.000 $8.793 1.7586 $1,595
For full MCI WORLDCOM Press Release, please check:
mci.com |
