Mark, IV goes to 0 when the deal gets done. IV approaches 0 as the uncertainty of the deal's closure goes away. It can go to near 0 on the day the deal is announced depending on how certain the deal will get done according to the underlying terms.
NOT TRUE. The options of the acquiring company continue to trade. And IV is nowhere near zero. Only the options of the company that was bought for cash go to zero. And tghat's why (in reply to the question) it's wrong to play the arb with long calls and long puts). Mark
The ONLY way you can be consistently profitable in merger arb, is to have insider information about the mergers before it gets to the public.