Dan has a trade for $RIMM that is based only on some type of takeout offer:
Buy the Jan2013 20call for $1.05
Sell the Jan2013 27.5 call for .35
total debit for .70 ($70)
Assumptions being made are that if RIMM is bought or taken out that the price will be $20 or higher and that it happens before Jan2013. as mike was alluding to, if an offer is made, lets say at 23bucks per share.. even now before january, most of the premium will come out of the options.. the 20call will be priced near 3bucks, and the 27.5 will drop to maybe a nickel...there will be no time premium because the takeout price is well known and advertised.. this will happen at any time prior to opex with the same result.
so if some offer gets made above $20 then unless you think there is going to be a better competing offer, you should just take your profits on the spread.. no reason to hold longer.. your lotto numbers hit.. cash it in.
This trade is only if you want to speculate on the takeout of RIMM. lets look at profit potential.. lets assume a 30 a share takeout.
Full profit is the $7.50 width of the spread minus what you paid. so $6.80.. so potentially a 9x max return.. 10 lot made you $6800, with $700 max loss.
