These stocks do not head straight up; there is volatility in the price action allowing investors opportunities to buy options to take advantage of the high-profile investor's public involvement and the stock's reaction. The best opportunities for profits emerge when the investor is speaking.
When Peltz spoke about Mondelez at the "Invest for Kids" Conference, the share price rose a dollar (I was in the audience at the event and will be there again this year for TheStreet). For those owning call options in the money, that was a nice profit for a day's work. Over the last year, basically the period that Peltz has owned Mondelez shares known to the public, the stock has ranged from $29.37 to $39.54, so there is money to be made in the price volatility.
That is equally true with mergers and acquisitions.
An excellent example is the recently announced merger between Reynolds Tobacco (RAI) and Lorillard (LO). The deal was in the press on July 15. Articles first started appearing about the merger on July 3. Over that period, Lorillard rose from opening at $61.23 on July 3 to hitting a high of $67.46 on July 14. But the stock price did not shoot straight up: on July 10 it was at $62.07, according to Yahoo! Finance.In other words, there was plenty of money to be made in the options market after word got out about the merger of Reynolds and Lorillard as the share price moved. Options are cheaper so it allows for speculating on the high levels of mergers and acquisitions, investor activism, and other actions at a lower price. As Apple, Mondelez, and the recent merger between Reynolds and Lorillard clearly show, it can be done following the market through TheStreet. Savvy investors should also track Peltz, Icahn, and others in speaking engagements, Twitter feeds, etc., to monitor their actions. The "Invest for Kids" Conference is coming up on Nov. 6: Speakers include Bill Ackman, head of Pershing Square Capital Management, and Nehal Chopa, with Tiger Ratan. There should be actionable trading advice coming from those investing luminaries and others as there has been in previous years. At the time of publication the author held no positions in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts