Watchlist for September 23: I'm tellin' y'all, FTBK's an arbitrage

Let us say there is a little crappy bank, on the verge of death, that agrees to be bought by a publicly-traded SPAC. The deal appears to be a done deal. The shares of the crappy bank do not budge for over a month. Then, with no news, the bank’s shares jump 100% in two days. The shares of the SPAC barely budge. The bank on the verge of failure is Frontier Financial Corp (Nasdaq: FTBK) while the SPAC is SP Acquisition Holdings, Inc. (AMEX: DSP). SP Acquisition Holdings will give shareholders of FTBK 0.053 shares of DSP and .053 warrants (exercisable at $11.50, over 15% above the current market price) for each share of FTBK. This translates into a value of under $0.70 per FTBK share.

Here are their charts

ftbk

dsp

There are two potential ways to play this. A trader could play this as a reverse merger arbitrage and buy DSP while shorting FTBK. I will look to play this as a daytrade by shorting FTBK with gusto when it goes red tomorrow or the next day. The risk either way is that somehow another buyer will come quickly and buy out FTBK at a higher price. I think that highly unlikely but the huge volume today could be indicative of some corporate raider taking that route. If DSP shareholders do not approve the merger and there is no other buyer, FTBK will likely be forced into bankruptcy.

VeriChip Corporation (NASDAQ:CHIP) -Up on news yesterday, but this move looks a bit overdone. I will look to short on green/red. The move is news-based so I won’t be very aggressive.

chip

BSD Medical Corporation (NASDAQ:BSDM) – Big move today on news. It should be a good mover tomorrow, likely to the upside. I would be a buyer on red/green or a strong open as long as it doesn’t gap up much.

bsdm

Gray Television, Inc. (NYSE:GTN) – After the last real news, earnings around August 7th, this stock was under $0.50. Now just under $3, this is an easy short on green/red or on a break below today’s lows. It was a good short for me today on green/red but it closed near yesterday’s close. Perhaps tomorrow will be its big down day. If it doesn’t do much tomorrow I’ll remove it from my watch list.

gtn

Disclosure: No positions. I have a disclosure policy.

0 thoughts on “Watchlist for September 23: I'm tellin' y'all, FTBK's an arbitrage”

    1. CABL had a huge spread A/H and few trades, actually I had an order to short more in at $1.28 but it didn’t get filled. Tomorrow it might make another decent short, but it is less ideal than GTN primarily because it is less liquid, with lower volume.

  1. Reaper,

    In order to take advantage of this “arbitrage” play, the correct trade would be to short FTBK and long DSP with equal dollar positions, correct?

    BTW, thanks for pointing out that ZRBA trade a while back, I was in 249 shares at 3.85 and out around 5.00!

    -wnkender

    1. Let me think on this. I’m not sure exactly. BTW, I wouldn’t recommend anyone doing this trade (or any I talk about!) without doing their own substantial due diligence.

    1. Very little–it is all text, which is low bandwidth. I’ve had no problem running my IB TWS while tethering to my cell-phone in an area with only the 2.5g EDGE network.

  2. ETFC pre-market leader, has some resistance ahead that if broken it could run.
    ILI pre-market leader on news this morning. Has some resistance way back on a 1 year chart that has been passed in pre-market. This could run higher.

  3. Yeah baby on ILI … on only 1k shares I made $484! I was in and out FTBK for $200 on 10k shares, not impressed with price action now.

    Reaper :

    I like ILI … only 45m mkt cap still. That was not a huge study though so I wouldn’t get too attached to it.

    1. That is definitely a case of needing to trade small and use a market order. That one trade raised my weighted average profit margin on pre-leader longs to 1.14% from 0.4% and double my profit to $940.19 for the year.

  4. Yep, your right. Next time I am going to go with 200 or 300 shares instead of 1000 share blocks, that way the pressure won’t be so great and I can learn execution, entering and exiting. I just have to get out of my head that even though I might not make as much with smaller orders, I also will not lose as much.

  5. Reaper

    1)
    In IB, is there a way to set an alarm that will activate when any of the stocks on watchlist (page) go up or down a specific amount or %?

    Say there are 50 to 100 stocks in page/watchlist and if any of the stock on that list drops say 20cents in a minute or so, then an alarm should go off to draw my attention to the security in my watchlist/page that is dropping/moving quickly.

    2)Have u used the Dashboard feature in IB? If not have a look at it. I use it bunch the stks in my watchlist at the top of the page. That way I don’t have to scroll a page to see what is the current price of various stks. Very easy on the eyes and fingers. 😉

    1. Short answer: no.

      Perhaps an add-on program like e-Signal would work? For myself I don’t really care because I am only watching a few stocks intently at any time and I can easily set individual alerts for them.

  6. I have asked QuoteTracker. It is free & plugs into IB’s data feed. Will let u know what response I get. I trade only the stocks that I know and put them in my watchlist. I have a decent sized watchlist and having this feature will make me go blind less quickly as I wouldn’t have to navigate this big list that frequently. 😉

    1. lol … twice today I’ve had a short order prepared for GTN, once I actually submitted it. But I chose to stay away. I’m up nicely on the day and GTN is far from an ideal chart.

    1. I traded two stocks, in and out, in the first 3 minutes 19 seconds of the trading day. There wasn’t any time to alert. See comment #14 above.

      And yes, $684 is a decent enough day for me. I’m not greedy.

  7. YRCW is at some serious resistance, if it breaks through it could go much higher tomorrow maybe. Seems there was some short squeezing today that pushed it to this point, it has bumped off this spot several times in the past.

  8. Agreed on GTN, I’m glad I covered, I came very close to holding O/N but 2.60 was relentless support.

    Of course I say that now, I’ll probably waste most of tomorrow watching it again.

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