News of a Deal Could Lead to a Short Term Gain for Traders...READ MORE
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 | | News of a Deal Could Lead to a Short Term Gain for Traders | | | Deals are often made in pursuit of long term profits. When companies merge, or when one completes a hostile takeover of a second, the goal is often to develop synergies that will deliver value to share holders in the long run.
In the short run, deals will rarely deliver significant value to share holders, at least from an accounting perspective. However, there can be large changes in the price of the stocks of the companies involved. There is often a large gain in at least one stock when a deal is announced.
This makes trading in anticipation of deals potentially rewarding, as we explain in our latest article, However, there can be significant risks. Because of the risks which include a deal not going though or a deal never even being announced, traders should consider risks when making trading decisions.
Using recent market data, we highlight a trading opportunity with a maximum risk of less than about $200. Although the risk is small, and strictly limited in dollar terms at the time the position is opened, the return of the trade could be significant.
This trade, again based on recent market data, offers a potential return of about 150% of the amount risked for a holding period that is relatively brief.
We have more details, including the specific trade, in our latest free educational article that is available right here.
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