Was it this easy. Could you have sold the 70 call yesterday and made the $5 today? Or do the strikes adjust in some fashion as a result of the tender?
This seems pretty similar to the Sears/Kmart merger in terms of the details. As I recall there is some reason it is not that easy. Like it depends on the tender percentages involved. I know that if you shorted the stock last night you will have to pay the tender for those shares to someone else. However, these deals are pretty confusing to me so I am probably wrong.
If your short options were not assigned then yes it would have been a layup. In fact, the open interest this morning was 116 so somebody was napping.
If you had been assigned then you would have had the $5 credit and a small debit (depending on the price you bought the shares at this morning). I wonder what could have gone wrong?
I don't know much about options. But if your options were assigned then it seems like you would technically be short shares before the tender offer. In which case you would have to pay the tender amount to the holder of the long shares. And your $5 profit would disappear if you do the calculations. Again, I am just theorizing here.
I thought about that -- also theorizing here. If I had bought the call right at the close and then been assigned. Wouldn't I be required to deliver shares the next day when I got the notice of assignment? This would be after the midnight tender deadline so hypothetically I would not owe for the $85. If anyone really knows I'd be interested in hearing the answer...
I would think the important date is the assignment date, not the notice of assignment date. Because the assignment took place before the tender deadline, you are short shares of KMG before the tender deadline.
You may be right. I can't believe there was a free lunch of that magnitude left sitting for all and sundry...