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Technology Stocks : The Learning Company (TLC) -- Ignore unavailable to you. Want to Upgrade?

To: Doughboy who wrote (6247)	2/16/1999 10:45:00 AM
From: Trader Dave	Read Replies (1) \| Respond to of 6318

the arbitrage IS NOT a simple 1.2 to 1 ratio. if a professional arb looked at this situation and shorted mattel and went long tlc, the worst case scenario is that they'd short mattel at $27, have the stock go to $36 and lose $9 on that side of the transaction, on the other side of the coin, they would only get a 1 to 1 ratio of mattel stock to tlc stock if the ten random trading days selected mattel is at $33 or better. therefore, they would see less than $9 of upside in tlc. so at the worst and unlikely case described above it is a money LOSING arbitrage. tlc is a LIKELY cheaper way of buying mattel (or at least has some downside protection, but it's not the best arb situation unless you are quite sure mattel gives you at least 1.1 shares or better.