price expectations and options

[blue water]

Price expectations

Assumption: deal will be announced before Dec. 20

There is a large space of reasonably possible share price scenarios, keeping in mind unfolding events.

A simple case:

110 a day after deal announced

125 by mid January

150 by mid March

200+ by January 1, 2015

A range case:

105-115 a day after deal announced

120-135 by mid January

140-170 by mid March

200-250 by January 1, 2015

Comments about these range suggestions?

For a given range expectation, how to play this with options?  It would appear that it would be wise now to plan to buy and sell options on the way up, rather than taking a static position with an expectation of holding until expiration.

(My view is that I have never, in several decades of investing, seen a better opportunity to make money with options.  I started a few weeks ago, with obviously spectacular results so far.  I lost with October options, but with spectacular results for December options.  I decided to skip Nov. options when a deal wasn’t announced before the end of October.)

[Putncalls]

Difficult to time

[jft310]

No one knows the deal metrics.

Thus we sell puts . We harvested our short jan 2014 options on Thursday and reset our options short puts into March deep in the money.

[smeltman]

I have a ladder of Call Options I bought up to $125 for January 2014. I will probably trim any that are still out of the money at the end of 'Deal announcement day'. I will use that to start adding 2016 LEAPS. The rest I will trim probably 2nd week of January.

I have March 2014  $100, $115, $120 Call Options. I will trim those mid-January, if no buyout occurs. I had just picked these options up last Monday, and added a few more after the home-run conference call, so up multiples on those. I may add to my Jan. 2015's with the proceeds.

I will also be buying more shares over the next 6 months for longer term holding. (3-5 years)