not vested
Stock Exchanges to Trade: CBOE Holdings (CBOE)
The CBOE is actually known as an options market operator and not a stock exchange. However, that could be close to changing.
CBOE is looking to acquire electronic exchange Bats Global Markets Inc (BATS:BATS) in a $3.2 billion deal by next spring. According to Barron’s, a merger could provide a radical transformation and prove a huge boon for CBOE and makes this a name to buy on any weakness.
We couldn’t agree more with Barron’s. As the chart suggests, that day of reckoning appears to be unfolding. Other investors have been less enthusiastic about the apparent synergies of this still pending deal and CBOE shares are currently below 200-day simple moving average and just barely breaching a long-term, trendline support.
In this situation, thinking the weakness may not be over just yet, but not minding the purchase of shares at lower levels due to deal’s underlying value to the CBOE franchise, the Dec $60/57.50 bull put spread is attractive.
Priced at 40 cents with shares at $63.50, the trader receives the full credit as long as shares are above $60 at expiration. That allows for a decent size decline in CBOE of 5.5%. Earnings however, scheduled for next Friday could force that type of move in short order.
Below the sold $60 strike the trader has the opportunity to take possession of CBOE stock through assignment and essentially become a buyer on weakness. What’s more, in the event that no longer looks as appealing, risk with this spread is limited no matter what may transpire in the future.
Source: investor Place