TEX/DM, DC - If the merger goes through it accelerates the expiration date and whatever the strike is when the stock closes is how you pay out. However, this is a stock swap so very tricky to value as it will depend on the dynamics of the two companies. TEX gets 60% of the combined company with $10Bn in total revenues and $854M in earnings (last year) so give them a 15 p/e (conservative) and that's $12.8Bn x 0.6 = $7.68Bn and 20 would be $17Bn x 0.6 = $10.2Bn, which is exactly where TEX is now being valued at $26.17 (post jump).
You can still sell the TEX 2017 $23 puts for $3 and that's net $19, which is very fair, even if the merger fails - I like that and you can add the $20 ($7.60) /25 ($4.30) bull call spread at $3.30 for net 0.30 on the $5 spread but that's betting the merger does go through just to make another $1.70 - not really worth the risk.
Bounces/Cervant - The idea of TA lines is you don't have to think, we're at:
- Dow 18,100 to 17,400 is 700 points is 3.8% and bounces are 150 points (round) to 17,550 (weak) and 17,800 (strong)
- S&P 2,130 to 2,080 is 50 points (2.3%) and bounces are 10 points to 2,090 (weak) and 2,100 (strong).
- Nasdaq 5,250 to 5,050 is 200 points (3.8%) and bounces are 50 points to 5,100 (weak) and 5,150 (strong)
- NYSE 11,050 to 10,750 is 300 points (2.7%) and bounces are 60 points to 10,810 (weak) and 10,870 (strong)
- Russell 1,272.50 to 1,207.50 is 65 points (5.1%) and bounces are 13 points to 1,220 (weak) and 1,235 (strong)
Gotta have 3 of 5 green to be taken seriously and that should have happened yesterday. Today (and forward, we need to see strong bounce lines to be impressed).
