Tuesday November 17, 10:59 PM
STOCKS NEWS US-Bristol options turn busy on spin-off plan
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Real (Frankfurt: BJU.F - news) -time Equity news
U.S. stock market report
1739 ET 17Nov2009-Spin-off plan stirs Bristol-Myers options
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Bristol-Myers Squibb Co option volume was seven times the norm,
with about 135,000 contracts traded. Most of the activity was related to
Bristol's proposed spin off of its 83 percent stake in Mead Johnson Nutrition
Co through a common share exchange offer. The action was dominated by
the December $30 BMY reversal/conversion strategy which traded almost 50,000
times each on the put and call side, said Trade Alert president Henry Schwartz.
The flow started on Monday, the first trading day after Bristol-Myers announced
the spin-off plan. The options combination traded for an overall net credit of
22.5 cents and then down to 20 cents as some investors bought calls and sold
puts against a short stock position, he said. The trade is a play on the ending
quantity of shares tendered along with the discount formula used in the
exchange, Schwartz said. Under the offer, every $1 of Bristol stock will be
exchanged for $1.11 of Mead stock. The exchange ratio will be set by a formula
based on both stocks trading prices on Dec. 8-10, with a maximum of 0.6027, a
Credit Suisse note said.
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