![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpKJg3SusyJl9YcNjNHgjVKs9wHLNBgLV_Cy0P4K8fdM_769jb9rXkeOhSqjiQ2aOUpTZ8QOx45Po6EJf-JWt8mp-VWuNhzRvPtMkXrlH6avqBFhJkpY17A0Bdze5g2HnTM4zcUtTO4pw/s400/aye_summary.gif)
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxy4Y4iCRyxFxd5rwkaAwQ3y-csR4OPAe6EdxrL4mXKAE0mvaXkZ2xfqAgEmbObpRb9epX2I5xMC2WVtWyYjc20TWPijAvFC0gpyOxKLnoLmEwIRKBSsAr26LzaHEoiw8T-zt1BDPef6M/s400/fe_summary.gif)
The news is presented below:
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1w0W7l6cvWwAgVPOa34OqLCvxJKCQ7jU29DnmuKxC6uo2bJEf8e10gIbbwepvmri598wc3z7szJ2YCRF92T4OeEcqUT3DdTM7808b6V8RCJjoxmxPvlHaOc3mzMS1hlIjXngaQ200l3c/s400/aye_c_action.gif)
So a stock deal where AYE = 0.667* FE to close in a year+. Before today, AYE was trading 21.02 and FE 41.46 ---> 0.667*41.46 = 27.65 per share for AYE. That's a 27.65 - 21.02 = 6.63 spread.
Since the news the spread has converged significantly ---> 39*.0667 = 26.01. So 26.01 - 23.23 = 2.78 spread. 2.78 still indicates measureable uncertainty.
The Charts Tab snapshot for each is included (click either image to enlarge).
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjD6UgLWkeC1T0UWQRe80XrDt1owvs8n5qr_dD3lp9zatsdapeNH7THvYkU2LIiW3Io07rrwbXOXc46nQzx8bo3JVxJDQYIvBp2S6vHlDTPKWUkUdJ6tmN5ttTePV8i-yik9WJllM3C5ds/s400/aye_chart.gif)
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgop3ma3mSr0Tizrw3H_Td0e4rB0OBiyT7vRrbMo26UL0cm6jpv3U3QQMz1kSDCxPQyVI6onl10qY1uAnumEds158WSk5WeiC1-XDxKivaVzcDaRjUt0TjlaUtDTsyeeh5sIt1hiCA14Zk/s400/fe_charts.gif)
Notice FE dipping and AYE rising.
A few things to watch out for now.
(1) AYE vol should converge to FE vol as certainty grows - it can be higher if certainty dissipates, but it should generally not be lower (watch out for dividends and other special situations).
(2) AYE should approach (2/3)*FE
(3) Cheap vol bets (purchases) around deal closing if you are a seller of the deal (or if there is edge).
(4) Expensive vol bets (sales) if you are a buyer of the deal (or if there is edge).
(5) Good spreads stock to stock (in options).
Watch the options markets moving forward - line by line with the stock prices as well as the implied rates (divergence can cause hard to borrow rates - see TLB deal HERE for an example).
This is trade analysis, not a recommendation.
Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html
No comments:
Post a Comment