Ticker: $SMED SMED
Description of why you are requesting DD: Trying to unwind my positions on the acquisition pop (was bag holding badly)
Applicable links to news articles or Reddit analysis: Sharps Compliance To Be Acquired By an Affiliate of Aurora
This all just happened this morning out of the blue for me and here I am scrambling trying not to be a bag holder on this anymore.
The deal is set to acquire SMED at $8.75 and expected to close sometime in Q3. Since my cost basis is above this price (11.69), I’m worried that my days of ever getting back above my basis are now lost forever. I’m also not sure what happens to this ticker name and if it get converted into another name?
What are my options on trying to get out as close to break-even on this? Is there a way to unwind my position? I realize the covered calls are locking up my shares… but technically I have 25 shares I could sell today and that would give me approx. $200 to then buy back my covered calls? Is there a scenario where I let this ride and make out “decent”?
Current shares: 1,025 shares @ $11.69 average position
Current covered calls: 10 contracts for the $12.50 strike expiring on 8/19/22 @ $.07/ea
So technically I have 25 shares free to sell today.
$0 brokerage cash at the moment (trying to get out of bad positions) But I would put in more if it guaranteed saving more basis.
Any and all eyes/thoughts on this would be greatly helpful. Time like these are when I see the community really come through and help. Thank you so much @internetkings for the trading floor comments on this so far.
“The acquisition will mean Sharps will become a private company and will be delisted on any public market following the completion of the deal, expected in Q3, the company said.”
So this means I need to gtfo or else, right? Think I use those 25 shares to buy back my calls then sell for 28% loss, is there another way out?
You tender your shares for the $8.75, your covered calls expire worthless.
I would not buy back 12.5 strike calls expiring in august, those are absolutely worthless.
FWIW I sold 10 contracts of AUG 12.5Cs to someone @ 0.05 today, free money w/ next to zero risk.
Thank you, so basically you’re saying I let this ride out and stare me in the face from my brokerage account until the deal closes and I just pony up and accept this is a 28% loss (which was an 80% loss just yesterday).
Did you sell those 10 naked? Or did you buy more shares knowing there’s basically a “floor” now? (Unless the deal doesn’t happen, but sounds like it will)
I would be thrilled that a piece of crap that was down 80% (and didn’t seem to have any prospects of recovering) is now down only 28%. Recovering from a 28% loss isn’t that bad, recovering from a 80% loss is almost impossible.
And yes, I sold the calls naked as I don’t think there’s going to be a bidding war for this company, and if the deal falls through the stock will drop 50% so the calls still won’t have any value.
Also being told there could be short term volatility as MMs close their positions. Here is the current short interest:
So if that’s the case, buying back my covered calls now could allow me to potentially sell on a pop when MMs close their positions?
I hear you and I very much appreciate this windfall moment. This is why I’m asking if I should just close everything down now incase the deal does flop. I can sell the 25 extra shares I have that aren’t used as collateral on the 10 covered calls, then use the money off the 25 shares to close the 10 contracts, and then just sell off my position around $8.37 (spot today) knowing this deal “could” flop before 8/19?
I’m seeing cost to borrow as 1.5% w/ plenty of shares available
Shorts aren’t going to pay more than the acquisition price to settle this, they’ll just wait it out and pay the 8.75 cash if anything.
Best option is to tender your shares, or just do nothing and your position will work itself out and you’ll be left with 8.75 cash per share.
If you don’t want to take the risk of the deal flopping then yes, you could close it out today. You can unwind it bit by bit if you don’t have the ability to do the entire trade at once.
(eg, sell the 25 shares, buy back whatever contracts you can, then sell the shares that no longer have calls against then, then do the rest)
Thank you so much for taking the time to help and answer my follow up questions on this. I appreciate this so much. This all makes perfect sense and falls in line with my general understanding of my positions.
Like you said, an 80% loss yesterday that is now only 28% loss today is MASSIVE and I do not take that for granted. This was a lot of money I tried to invest from freelancing during the pandemic and I’m so grateful to get most of it back. Even better, I’ll be able to join y’all trading again once this money settles (and I withdraw money I don’t want to trade anymore… kids are expensive…)
This article is literally me… but not actually… LMAO wow can’t make this up
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