Speaking of Acquisitions...
Wednesday, June 27, 2007 at 12:16PM
I just rolled into work and saw tons of questions about what to do in a situation where you have a position in a company that has just been bought out. These types of situations don't occur all that often, so here are a few ideas to consider.
First: Celebrate. Pat yourself on the back. A win like this covers all the years small losses, and then some. There is no skill here to determine this news before it is released, but as luck would have it you have been given a gift. Accept it.
Second: Sell the position.
The question lies in the fact that the offer was for $63 per share, and right now the price is at a discount at $60 per share. However, since the options have all but collapsed down to intrinsic value, there is really no reason to hold these options over the next several months waiting for another few points in the stock.
Here is the last acquisition we traded in front of. Armor Holdings. Notice that the stock has traded in a very narrow range. In fact for a few days after the acquisition, you can see the stock price dropped quite a bit.
Best thing you can do is nod to the trading gods, offering your utmost respect and gratitude and exit the trade. There isn't much more you can do here.
Oh yeah, I don't think I'll get asked the question, but if you are wondering...
No! Never buy a stock after it has been acquired.
First: Celebrate. Pat yourself on the back. A win like this covers all the years small losses, and then some. There is no skill here to determine this news before it is released, but as luck would have it you have been given a gift. Accept it.
Second: Sell the position.
The question lies in the fact that the offer was for $63 per share, and right now the price is at a discount at $60 per share. However, since the options have all but collapsed down to intrinsic value, there is really no reason to hold these options over the next several months waiting for another few points in the stock.
Here is the last acquisition we traded in front of. Armor Holdings. Notice that the stock has traded in a very narrow range. In fact for a few days after the acquisition, you can see the stock price dropped quite a bit.
Best thing you can do is nod to the trading gods, offering your utmost respect and gratitude and exit the trade. There isn't much more you can do here.
Oh yeah, I don't think I'll get asked the question, but if you are wondering...
No! Never buy a stock after it has been acquired.
Reader Comments (111)
Something else for me to work on.
GTRC -- So you don't think it's going to $63 any time soon? I'm sitting on 60's and could use those next couple of dollars. I guess pigs get slaughtered.
Will be smart, listen to Jeff, and take the profits.
Hmm...maybe there is hope for me after all.
thanks
strat
I was wondering if I should jump into the trade now that the acquisition in complete?
Addicts at large,
Also I have 4 days until I leave to cruise the Baltic. I will have to scale out by next Tuesday. I was thinking that maybe closing all positions before the big meeting tomorrow what do you think?
Is my second question as stupid as the first?
Cheers
Dave
Trading driven by candle patterns is a recipe for disaster. Just like when you're driving your car and you see it starting to rain, you slow down, but you don't throw your car into park the second your windshield gets wet. Use the candles as confirmation. Since the day isn't over yet, you can't even view that candle as complete, so don't worry about it.
As for me, I see a clear level of new resistance at $30 and rather than get scared, if i am lucky enough to get a retest, i'll double my position.
Anyone else take down BWLD on the bounce today?
I know you asked Brett and not me but I'm going to step out on a limb here and offer my opinion on SKX just to confuse things (hey, why should I be the only one confused by this market?)
I see some serious support going all the way back to November at the exact level of yesterday's close and today's open. In other words 28.5ish. You might be stuck in a range here between my support and Brett's resistance for a while.
You're a comedian, right!?
Honestly the choice on the Fed is completely up to you.
My $0.02, the market is up prior to the meeting. Positive market sentiment...maybe? The market has already figured in the fact that the FOMC is NOT going to cut rates. The only remaining question is whether the Fed will consider inflation a low, med or high risk and based on that, what the prospects are for a rate hike later in the year.
Since some government banks in different countries have been hiking their rates, it makes it easier to raise rates in other countries as well, so that is a risk too.
Having said that, personally I bought into several positions as anticipatory moves somewhat earlier today, which so far are working out. So, based on all of this, I'm not expecting any major problems tomorrow, although anything can happen... Of course I might be wrong and regret my moves today, although I had fun while it lasted!?!
I'll drink a Franziskaner Hefe-Weisse Dunkel (German Dark Beer) tonight to ward off the bad Fed spirits!
Any thoughts on this one?
This market is really frustrating me
I don't what "The" BSC trade is, but i'm in 2 BSC trades. One was on the breakdown Friday and another is on today's successful retest of resistance. I don't know about profits to losses because I don't have either until I exit the trade.
On a side note, how about that CLF? The heart of a champion. Look at that hammer just over support at $75. I don't know if this is going to catapult the stock higher or delay my exit by a day, but THIS is why i never exit intraday anymore.
Thank you both for the comments.
Brett, this might be a stupid question, but cant today be considered the retest? It has already hit it and backed way off the highs of today.
DG - I do see the support you are talking about back in Oct. there, but this descending triangle breakdown is far too sexy for me not pay some attention to:) I use a time stop of 7 days if it does start going sideways - but I dont think it will be needed.
I remember a coach from the Investools hotline saying that he can come up with an arguement for any side of a trade you showed him. For every 100 people that say this is a great break, you can probably find another hundred saying it is sitting at resistance.
I thought that was pretty interesting because when the ass was dropping out of my account, I found that I was subliminally looking for a reason NOT to get into a trade. It will be interesting to see what happens.
I'm holding one position I was going to bail on early in the day until this news came out. Also got into ARD, which has a nice flag breakout today with above average volume.
I had a few heartstopping moments early today with CLF but I guess now I'll stick it out. At least until tomorrow.
Re BSC, gave back all my profits today and then some but will stay in it and keep repeating to myself, 'retest, retest, retest'. It hasn't crossed any lines for me to exit but if the market interprets Uncle Ben's comments tomorrow as bullish, this could go right back up to 150.
Not a bad guesstimate for the Dow early this AM! Good Job!!! Gotta run, wanted congratulate you!!!
I need to put this in bold print in my rules as I sold CLF this AM. I was on the fence yesterday, and this AM's action pushed me over- duh! Another learning experience I guess.
DG- I'm with you on not wanting to be too active before the Fed announcement, but couldn't resist FCX.
CLB sure looks nice, but I think it boosted too far by the last hour of trading for me.
Thanks for all your help folks.
Raimo, check out TUI :)
Peter
I too gave it back today on BSC. A close above $145 is my exit.
TUI...Does not come up..is that the right ticker??
Glad I held onto my positions that didn't break support.
Michelle
Part of trading....
I bought and tried to read "When Genius Failed." Am I missing something there? You have it on your favorits, but I can't seem to get into it or get anything out of it.
Michelle