Thursday, October 22, 2015

Some Random Thoughts

I have a great deal of respect for most Research Analysts as it is not an easy job. But when I see a headline such as “SanDisk (Ticker: SNDK) stock price raised to $86.50 from $63 at Stifel Nicolaus”, I scratch my head. Is this really necessary? Just a waste of time to put this out and for someone to actually read this…

Ok, enough of my gripes!

What I actually wanted to write about is the dangers of shorting naked Puts. Back in February I sold some naked Puts (January 2016 $170) for $13.60 on Valeant (Ticker: VRX) after it agreed to acquire Salix. At that time, I thought the acquisition would help boost Valeant stock price and would be relatively easy money. Fortunately I closed out the position a few months later with a small gain, but I would be looking at a nice fat loss if I held onto the position. Those same Puts are currently trading with a bid of $77.50 / ask: $80.60. Another lesson on not to be too greedy…


At October 22, 2015, Anonymous mergerpie said...

I agree with you. there is no perfect way to trade a merger/special arb. it depends on situation. I never tried short puts for merger plays because its not efficient on trading margins. However, holding long stock has its own set of dangers. I was burned quite badly on Syngenta during August.


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