Tuesday, November 17, 2009

Will Ciena Win or Lose the Nortel Auction? Profit Either Way

The deadline to enter the auction for Nortel's optical unit ends today. Publicly only Ciena is a bidder. According to Barron's, investors are expecting Ciena to lose, and that is what is driving the price up lately. If Ciena wins, the stock might sink again.

Here are the straddles, computed with StraddlesCalc, where investors will profit either way, as long as the stock moves the maximum move required:

The 14-14 is near the sweet spot. The 13-15 is wild and risky.

Options are very risky and may incur a 100% loss. Please do your own due diligence. Not advice.

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Bo Gowan said...

The auction isn't today (Nov 17th). Today is the deadline for bids (which was extended from Nov 9th).

See the press release hrere: http://bit.ly/YBeXt

The Shocked Investor said...

Thank you Bo. Indeed is not known when the auction will end for sure. However, the issues is that if there are no other bidders, then Ciena will win, and its stock would likely plummet in that case. That is why it was important to start a position today. If there are other bidders, then there will be more time.

There was heavy trading of CIEN in the closing minutes today, over 300,000 shares in the last minutes.

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