Options Analysis: JOSB/MW Deal
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Based on the price action of JOSB, it is obvious that the market still believes a JOSB/MW deal is going to get done. If the market believed the deal was going to fall apart JOSB would be trading near its pre-deal price of $40-$45. What is now obvious is that the board of directors of JOSB wants more money than they are being offered.
Based on what is a lot of brinksmanship, I think the JOSB board may want $58-$60 per share in order to get a deal done. That is a nice premium over the current price. If JOSB doesn't get that price range and the deal actually falls apart then this puppy could tank.
Looking at the options are I think there are a lot of plays that make sense. One play I like is an April 1X2 call spread. I would buy the 55 calls and then sell the 60 calls twice against it. As long as the deal price stays below $63.75 and gets done, the trade comes out a winner. If the deal gets done at $55 (which it seems like it won't), or the deal completely falls apart, this trade could lose.
Another interesting trade would be a risk reversal betting that the deal gets done at under $60, or falls apart. One could trade the April 35/60 risk reversal, buying puts and selling calls to collect a small credit. All of these plays fall more on the deal arbitrage side, but make perfect sense for those that understand the two companies and/or are already long shares in one or the other.
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