The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone, this is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be answering the question, “Should we trade options after a merger or a buyout is announced?” This is again, a question that came from our community, so thank you so much for submitting your questions to me because it definitely helps out. The reality is that when a merger or a potential buyout of a company is announced, what people typically often think and what typically happens is that the stock now trades dramatically higher based on the agreed upon share price. If company A says that they’re going to buy company B for $10 a share, then the stock immediately starts trading to that. It’s usually a premium. The company is going to buy them for a premium, so that all the shareholders and board members will accept the deal and approve it. Then the stock starts trading immediately higher, but the reality is that even though it had a lot of volatility heading into that event or that one-day event