More Arbitrage Trades

A couple more merger arbitrage trades popped up on my radar this week. First up is Pharmaceutical Product Development(PPDI). PPDI is being bought out by two private equity groups: The Carlyle Group and Hellman & Friedman. They have offered $33.25/share and are expecting to finalize the deal late this year. I sold a January $32.50 put for $1.06 this morning. With margin requirements of about $800, this will give me better than 13% return...not too shabby for less than 4 months.

• Sell to Open: 1 PPDI Jan 21 2012 32.5 Put @ $1.06

Telvent GIT(TLVT) is being bought out by Schneider Electric(SU.FR) for $40/share. The options prices are very attractive despite the stock being up almost 5% this morning. I don't know if I'm missing something on this deal, but everything I can find seems to indicate it's a done deal. I might end up regretting this one, but the returns are high enough I'm going to take a chance on this. I sold the February $40 put for $3.20. That comes out to about 28% return on margin in about 5 months.

• Sell to Open: 1 TLVT Feb 18 2012 40.0 Put @ $3.20

There's another one I've got my eye on as well. Temple Inland(TIN) being bought out by International Paper(IP) for $32/share. Right now the option premiums aren't very attractive and the deal isn't expected to close until next February. Rather than tie up margin for that long, I'm going to wait and see if I can get a better option prices down the road.

The Numbers

• Cash: +$426
• Short Option: -$525
• Margin: -$1,900