By Scott and Ilene at Dark Horse Hedge – Super Rad, RDWR
All systems go
Soon the world will know
The fury of attack
Feel the wrath of
The super rad super rad super rad
Su-per Rad! – Aquabats
Scott came up with this song; it’s hard to believe, but he managed to find a song to fit the post "Super Rad" and I won’t say anything about "Super Bad," I’ll leave that up to you. More from Scott…
We are feeling pretty super about Radware Technology (RDWR) after a 21% surge on Monday to $39.77. The virtual Dark Horse Hedge (DHH) portfolio bought 100 shares of RDWR on November 11, 2010 at $33.39. Using Phil’s Buy/Write strategy, DHH sold 1 March 2011 $35 Call for $3.30 and 1 March 2011 Put $5.10, taking in a total of $8.40.
One strategy at this point would be to sit still and keep the $8.40 option premium, and let the shares be called away at $35 for an additional $1.61 profit (total profit $8.40 plus $1.61 = $10.01) But at DHH we “feel the wrath of the Super Rad” and would like to potentially enhance our return on RDWR given the suggested buyout price of $47. Our virtual DHH portfolio will buy back the Mar 2011 $35 Call at the open, Tuesday, December 7, 2010 (at approximately $6.75) and sell the Jan 2012 $35 calls (approximately $9.25). The added time element will be moot in a buyout as all positions would be settled at the time of acquisition. The Put should expire worthless in this scenario so there is no need to do anything with it. There is a rumor that HP may also be interested in acquiring RDWR which could cause a bidding war with Riverbend, if those rumors are indeed true.
Buy (back) RDWR Mar $35 call at the open, Tuesday, December 7, 2010
Sell RDWR Jan 2012 $35 call at the open, Tuesday, December 7, 2010
