Monday, February 22, 2010

Spec trade in SII

Schlumberger (SLB), just announced this weekend that the board has approved its purchase of Smith International (SII). The deal is valued at $11.34 billion. This values the shares of SII at $45.84 a share. The stock is currently trading at $40.26 per share. So there is potential for another $5.58. So I am looking to sell 1 Jan '11 2011 $45 put which is currently trading with a mid price at $7.75.

The risk here is that there is regulatory hurdles that could kill the deal. But I am going to bet on the deal going through.

Sell 1 Jan '10 $45 put at limit price of $7 or better.

1 comment:

  1. Filled at $7.70. Would be interested in adding one more around the first gap up to $37 when the potential deal rumors first popped up.