GM reverse conversion

You missed a key word, the press release said he intends to do it, but it hasn't materialized yet. That's what the article writer was refering too.

Quote from freehouse:

First of all, the stock was up yesterday over Mr. Kerkorian’s tender price of $31 after it traded some 60 million shares, nearly six times the normal recent volume (one funny thing is that so far we haven’t actually seen a tender offer from Mr. Kerkorian, just the rumor of one).
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What BS. Then I wonder what this press release is all about:



LOS ANGELES--(BUSINESS WIRE)--May 4, 2005--Tracinda Corporation today announced that it intends to make a cash tender offer

Obviously, there was a press release issued that Uncle Kirk was going to buy stock through a tender offer. Does not look like a rumour to me.
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So what was the risk here to making the play on Wed, after the scam 30 million call in.

I know this worked out, but was there still some measurable risk in being short GM, enough to make the .35 cents or so a 'modest' roi?

Still seems like the unwind came very fast, especially since it was BEFORE the s&p news.

You want to play with fire, check out the KMG play.
 
The article I quoted above seems to explain why the skew was present. Those put writers who were hedged with short common were forced to cover the stock and thus the puts. Since the volume of forced covering was so disproportionately large, pure supply and demand blew things out. And since GM was so hard to borrow, new arbs were in short supply to keep things in line.

I was able to get GM short on Wednesday through IB, apparently one of the few, so I guess I was just lucky to be able to take advantage of the situation.

I'm assuming all those buy ins had to be completed by Wednesday's close and by Thursday things were back in line. I've received buy in notices before and had to cover by the end of the day. I've never been bought in without notice.

I guess my risk was that I too would be forced to cover my short and would have to pay up to unwind the options side of the trade. So what would that risk be, 10, 20, 30 cents? Certainly in line with the profit target I was looking for.

Like I said, I'm a newb when it comes to options trading and would really like to be filled in here if I'm missing something or was taking on substantially more risk than I thought.

Appreciate all the feedback on the thread, and props to Reardon Metal again, it was his trade, I just coat-tailed.

Corey
 
Sometimes the easiest money is made when you don't know what could go wrong.

At least the right questions are being asked here.
 
Yep, Rearden really nailed it. Except for the dividend and stock loan issue, the trade was there. From my experience in the options game, there aint never no such thing as a free lunch. One usually gets the appetizer and entre, but the beverage could send you for a loop.
 
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