Trade Advisory – 02/19/20
Feb 19, 2010 Mergers & Acquisition, Options, Stocks, Trading Idea
The following is from the latest issue of The Options Capitalist, our subscription based trading advisory service for options traders.
The Options Capitalist
Smith International
02/19/2010
Shares of oilfield services company Smith International (SII), are up $4.53 on a report in the Wall Street Journal, that the company is in advanced talks with Schlumberger (SLB)on being acquired, with an announcement possibly coming next week.
The move in the stock today represents a better than 13% move, but we are hoping that if a deal is announced, Schlumberger’s offer will be higher than the current $37.88 price of the stock.
On December 14, 2009, Exxon Mobil (XOM) announced a $41 billion offer for XTO Energy (XTO). Although this was a slightly different field, XTO is an energy producer, the premium was 25% and hopefully an offer from SLB would be at least similar.
Buy the Smith International (SII) March 37 calls. The current price is $1.95 by $2.10, indicating a $0.15 spread, which will cost us a whopping $15 for each contract plus commission. However, if an offer for the company comes in higher than the current price of the stock, that would put us in a very nice position profit wise.
The Options Capitalist
http://www.navivest.com
Tags: exxon mobil, navivest, options capitalist, smith international, xto energy
