Author Topic: Immunomedics Risk Arb  (Read 2714 times)

wescobrk

  • Hero Member
  • *****
  • Posts: 796
Immunomedics Risk Arb
« on: September 13, 2020, 02:07:58 PM »
Gilead is buying Immunomedcis for $88 a share in cash.
Depending on what the stock starts trading at tomorrow, this could be an interesting risk arb deal.
Anyone on the board that has knowledge in this sector as far as any regulatory agencies risk that might kill the deal?
I don't see high risk of the deal not going through. The FDA approved trodelvy in April and Gilead has made similar acquisitions in the past.
« Last Edit: September 13, 2020, 02:52:02 PM by wescobrk »


boilermaker75

  • Hero Member
  • *****
  • Posts: 1262
Re: Immunomedics Risk Arb
« Reply #1 on: September 13, 2020, 03:44:17 PM »
I was thinking the same thing. What I do with these situations, if the premiums are good, is write short terms put on IMMU.

ander

  • Full Member
  • ***
  • Posts: 204
Re: Immunomedics Risk Arb
« Reply #2 on: September 13, 2020, 04:44:54 PM »
Hard to predict regulatory agencies, but unlikely that deal is rejected (e.g, cancer is highly competitive space, there isn't a concentration of indications being addressed, etc.). High probability of deal being completed is what I would guess. Besides the short term puts on IMMU, what other risk arb positions were you thinking?

ander

  • Full Member
  • ***
  • Posts: 204
Re: Immunomedics Risk Arb
« Reply #3 on: September 14, 2020, 06:37:27 AM »
I don't see anything to do. Please let me know if you have any ideas.

boilermaker75

  • Hero Member
  • *****
  • Posts: 1262
Re: Immunomedics Risk Arb
« Reply #4 on: September 14, 2020, 07:11:07 AM »
Have to wait till options start trading near the current share price to see if they are worth selling.

I like selling puts in these situations because you know exactly your return and the end date.

thepupil

  • Hero Member
  • *****
  • Posts: 1971
Re: Immunomedics Risk Arb
« Reply #5 on: September 14, 2020, 07:27:01 AM »
Have to wait till options start trading near the current share price to see if they are worth selling.

I like selling puts in these situations because you know exactly your return and the end date.

isn't selling a put on a merger arb, basically the same thing as being long announced spread merger arb?

I guess the puts can work better if there's unexpected timeline extension but not a break, but it's basically the same thing, right?. You do lose the overbid optionality, but that's pretty rare and only relevant to some situations.

Risk arbitrageurs rightly describe their business as one of put selling.

Is there a non-obvious reason that put sales are better than being long the spread?


boilermaker75

  • Hero Member
  • *****
  • Posts: 1262
Re: Immunomedics Risk Arb
« Reply #6 on: September 14, 2020, 07:59:08 AM »
Have to wait till options start trading near the current share price to see if they are worth selling.

I like selling puts in these situations because you know exactly your return and the end date.

isn't selling a put on a merger arb, basically the same thing as being long announced spread merger arb?

I guess the puts can work better if there's unexpected timeline extension but not a break, but it's basically the same thing, right?. You do lose the overbid optionality, but that's pretty rare and only relevant to some situations.

Risk arbitrageurs rightly describe their business as one of put selling.

Is there a non-obvious reason that put sales are better than being long the spread?

It is basically as you mention knowing the time. If I write Sept 18 expiration puts my play is over on Sept 18 and I know precisely my percentage gain. Then I can do it again. If I buy IMMU, there are two unknowns. The deal may not go through and it may not close when expected.

ander

  • Full Member
  • ***
  • Posts: 204
Re: Immunomedics Risk Arb
« Reply #7 on: September 14, 2020, 11:37:31 AM »
Anyone surprised that it's at $84 in a 0% interest rate environment -- basically yielding close to 5% upon tendering the shares?

boilermaker75

  • Hero Member
  • *****
  • Posts: 1262
Re: Immunomedics Risk Arb
« Reply #8 on: September 14, 2020, 12:30:23 PM »
Wrote 65-strike, Sept 18 expiration puts for $0.40 per share.

ander

  • Full Member
  • ***
  • Posts: 204
Re: Immunomedics Risk Arb
« Reply #9 on: September 14, 2020, 12:46:05 PM »
I took more risk and wrote the 2023 puts at 65 strike. What you're doing might be the smarter play in that you get value for the theta (time decay) and can end up in the same spot while rolling over every week, versus I get stuck.

And even better may be writing the higher strike puts when they're available like you said.