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Who buy TALK over $8.1?
- Thread starter tonyzhou1
- Start date
Quote from mschey:
I was having some fun with this, and making some money scalping, but my shorts at 8.1 and above were no good. I'm still holding some short, we'll see how it works out next week.
The only reason to pay more than 8.1 is if you think another bidder will appear. Someone thinks so.
If this is the case, then, if one stock is acquired, and if the price is below the acquired price, we should always buy in and wait to sell when the price above the acquired price.
For example, I sold my shares today at 7.95, but I am still lost about 3-4% gain today coz the price is now 8.2
Is this a general rule? All the acquired stock will run like this? If it is true, then I can focus to buy and sell according to this strategy to get a quick 3-4% profit
No. The price will rise very quickly on announcement, and usually remains at a discount to the takeover premium. Typically they find a small trading range, and then price ends up at the takeover price the day the deal is done.
If the deal doesn't get done, the price will fall back to 6.50. That's your risk if you are long. If you short over the takeover price of 8.10, your risk is that another bid will come in, and that could be 10 or 20%.
If you are going to trade these things, you need to do a lot of homework on mergers and acquisitions. There are many events that can happen that change the dynamics of the spread instantly.
If the deal doesn't get done, the price will fall back to 6.50. That's your risk if you are long. If you short over the takeover price of 8.10, your risk is that another bid will come in, and that could be 10 or 20%.
If you are going to trade these things, you need to do a lot of homework on mergers and acquisitions. There are many events that can happen that change the dynamics of the spread instantly.