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Option Strategy Analysis

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Firm A is likely to be the target in a takeover attempt by Firm B. The stock price is likely to rise over the next few weeks as the takeover progresses, but if it fails, the stock price of A is likely to fall even more than the rise. What option strategy might exploit this information?

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Solution Summary

This solution discusses the ideal stock option strategy based on the given hypothetical situation.

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Hi,

** Please see the attached file for the complete solution response **

Here there is an uncertainty as to whether the stock price will either go up or go down. ...

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