PRLog Org Global Press Release Distribution Mergers and Acquisitions Strategy by rickhesse


									PRLog.Org - Global Press Release Distribution

                     Mergers and Acquisitions Strategy and Deep Put Option Strategies

       Dated: Dec 21, 2007

       Discussion of basic strategies for good potential gains while reducing risk in the stock market.

       Mergers and Acquisitions – A Core Strategy

        A quick look at the principal and interest chart on shows that we can make a
       substantial amount of money each time we invest our cash on hand in announced mergers and corporate
       acquisitions of public companies.
        Frequently we are able to buy shares of stock in a company after the announced buyout and earn three or
       four percent on our money by simply purchasing the shares and tendering the shares to the trustee handling
       the merger or acquisition. This approach allows us to act as if we made a three percent per year gain five or
       six times in one year. This is a very good way to increase our investment return. We examine all companies
       that have announced merger activity.
        We like to get involved based on shareholder acceptance of the terms offered by the acquiring company.
       We then will buy the equity and tender the shares IF the completion date fits our investment parameters
       (several opportunities to invest in short term transactions per year).
        Last year we participated and recommended two deals for direct investment of the shares. See our past
       websites and for our discussion of the DLP and Harrah’s
       Entertainment transactions.

        Our Option Strategies:

        Options are risky – fact.

        Options are not risky – fact.

        The Black-Scholes options model has seven variables. The Gastineau-Medansky model has five variables.
       “Variable” is a nice word for “guess.” Insert the correct variable/guesses and the model is correct. Base the
       model on the wrong - things like what a stock will be worth and on what date and you keep the Federal
       Reserve Governors up all night. Variables can simply be bad guesses in the wrong direction. Variables can
       be very expensive. Will interest rates rise? Yes, some time. Will rates fall? Yes, some time. When? Today
       is 31 October and the Fed lowered rates today. Is it permanent? Is it merely stopgap? Will the Fed need to
       raise rates? Or lower rates? All variables lead to assumptions and risk management should be based on
       principal and interest chart assumptions weighed against the risk free rate of return. (please see: our
       discussion of our definition of the risk free rate of return). We don’t like guesswork.We generally have two
       options strategies we put to good use:

        1. We like to sell people puts on stocks that have been pummeled by bad news. We like to receive a great
       deal of money for deep puts – say a $25 put on a stock now trading at $2 per share selling for $22. We like
       to have people give us their money for a long period of time so we can invest that capital with our capital
       and make enough interest to get our cost of the shares to almost zero if the company goes broke. If the
       shares rise, we make all of the profit on virtually no risk to our capital - we merely lose interest and not our
       principal. This is one of our very favorite strategies. We have one position like this now that we explain in
       detail to the subscribers to our November newsletter. We think one thought that the reader might be able to
       use – now or as a strategy for the future - is worth the price of a subscription.

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PRLog.Org - Global Press Release Distribution

 2. We sometimes purchase shares of companies that are out of favor and then on the recovery/rebound we
sell calls on the shares that we own. Frequently, these calls have expired worthless to the buyer and we
have kept premiums approaching the actual price we paid for the shares.

 In cy1996 we purchased T2 Medical shares based on a price decline from over $60 per share to $5 per
share. At $5.00 per share we purchased all available shares of the stock. We continued our buying until we
had accumulated over 1% of all shares in two days. This was the bottom of the decline. We based our
decision on the fact that T2 Medical had over $3.60 per share in cash, owned several blood banks, nursing
homes and infusion therapy centers. The company had no debt of any sort on the balance sheet. The
company fell from favor based on the illegal practice of paying physicians for patient referrals to their
infusion therapy centers for kidney dialysis. This was illegal, but we guessed – not fatal. The founder who
had retired returned to run the company. We sold the call options several times as the share price recovered
and the company was sold to Corum Healthcare Corporation 1.5 years later. Instead of getting $12.50 per
share we had sold the $7.50 call option, then the $10 call option and finally the $12.50 call option. By doing
so we grossed approximately $15 per share instead of the $12.50 we would have received with a simple buy
and hold strategy. We discuss our current option positions and reasoned guesses in the current issue of our

Have a wonderful investment life.

The editors.


My Investment Life is a publication dedicated to the proposition that financial education is best learned
from those with vast experience and great success – even outsized success – over time. We posted and time
dated our results at and for August 8, 2006 to August 8,
2007. Those results are up approximately 48%. This is pretax return and with no accounting for the cost of
brokerage commissions or taxation. If you like last years results, sign-up and read our reasons for our
current investment decisions. We offer a money back guarantee.
 We have a series of articles that define our investment process and the use of actual investing tools – not
the computer programs that give a buy or sell signal - but our actual reason to commit capital. We advertise
and recommend the products we actually use to make investment decisions.

Category           Business, Education
Tags               mergers, acquisitions, options, put options, stock options, stock strategy, option strategy, deep put
Email              Click to email author
Phone              435-216-4246
Address            1112 S Castle Stone Circle
City/Town          Washington
State/Province     Utah
Zip                84780
Country            United States

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