Wednesday, November 11, 2009

Tax Loss Selling and Another Risk Arb Play

It’s time to pull out the weeds and plant some seeds… I started some tax loss selling to offset some gains for the year. I dumped Sears Holding (Ticker: SHLD) in which I incurred a super 59.7% loss. Fortunately, it was just a small position so nothing major, but a loss never feels good even if it’s a small loss. I also did some repositioning of my portfolio, which I’ll post at another time.

I’m still sniffing around for some decent risk arbitrage opportunities. I just started building a position in MTS Medication Technologies (Ticker: MTSI), which is being acquired by Excellere Partners for $5.75 in cash. This represents a 3.9% spread based on today’s closing price of $5.53. This deal is expected to close by the end of Q4 so you’re looking at a ~ 28% annualized gain. Be careful if you decide to play this deal, it’s very thinly traded and just a few shares can move the price. So use limit orders!

If you want to learn more about the risk arbitrage, I suggest you check out The Deal Sleuth blog (click: here). He also has a free eBook on his site for download (click: here). Check it out...


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