$IMMU Merger Arb - place for cash - maybe 3% return

[Andrew Stepner]

I put my extra cash into $IMMU merger arb. From a source I like:

"short term cash arb... There is NO anti-trust here.  This will have HSR expire on first try which is next two weeks (I don't know exact date).   I have no margin so I can't buy it.   If you sitting in cash, do work on this, it's free $."

It is only maybe a 3% return but it seems likely to close soon and with very little risk. Good spot if you have cash sitting around getting 0% at the moment.

Makes me even wonder if I should go on margin some for it.

Stepner

[Andrew Stepner]

HSR expired (what we wanted). Still a chance for ~0.50% return left, for 1 week (I heard). Annualizes to ~30% so still a fine place to park cash temporarily if you are sitting on it without a use for it.

[Richard M]

Great call here. 

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sent on the go

[Richard M]

PSA. Jan 22 $80 puts I got filled yesterday for 50 cents when the stock was 87.50 vs a deal price of $88 cash. 

Like for like, that's less risk if the deal breaks for some reason. Since it's a cash deal the option expiration will accelerate. So you will make the same return. 

[Andrew Stepner]

Far fetched that it would be found to be a fraud and break but that's probably the downside risk it is pricing in for puts? It was trading in the 40s before the deal so there IS downside conceivably. I just think the only risk is that its a complete fraud and that's a pretty unlikely scenario.

To me selling puts is similar nature to owning the underlying stock here. Especially because there is no upside to the underlying beyond $80 where it is capped. So its just about the downside which is why a put is similar dynamic to the underlying.

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[Andrew Stepner]

Meanwhile, interesting thought to sell puts, thanks for mentioning it.

[Richard M]

The point is that if you buy at $87.50 and the deal goes through, you make 50 cents.

If you buy at $87.50 and the deal breaks down to $40, you lose $47.50.

If you sell Jan 22 $80 strike puts for 50 cents, you make the same 50 cents (it's a cash deal - option expiry will accelerate).  But if it breaks, you would only lose $39.50 ($80 strike, 40 price, less the 50 cents you received), rather than $47.50

In fact, if you are "willing" to lose $47.50, selling the Puts allows you to sell 1.2 puts, offering 20% more juice for the same risk.

It's equal reward, less risk.

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Richard Mordini

[Andrew Stepner]

Oh, interesting, I didn't even think to do that math. I'll have to mull this over more.

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[Richard M]

Just got a contract adjustment notification for the Put into all cash, so I believe this is done. (my $80 strike puts would be you are normally forced to give me a share and I pay you $80; now you have to pay you $80 and you'd have to give me $88 in cash, meaning you'd never do that so the contract will expire. 

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[Andrew Stepner]

Interesting.

I am still waiting for my tendered shares to cash out. I expect to wait a bit longer.

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[Andrew Stepner]

FYI, I got the cash for it Tuesday evening.

[Andrew Stepner]

I need the next place to rollover my cash. Hmm