Well, minus a discount for however long you think it will take before that actually happens, taking into account such things as inflation, interest rates, and market performance (due to the opportunity costs of holding this stock until then).
>A fun side effect of all of this: if you believe in the court's ability to force Musk to buy Twitter, you should continue to buy up stock until it reaches the price Musk agreed to pay for it.
How do I bet on no outcome one way or another for many many years? If there's one thing I know about the US legal system it is giant corporations battling each other takes years and years to resolve.
Without knowing how much background you have a simple summary would be:
A Straddle is a strategy that allows you to bet that a stock's price will change by x% by a certain date. To make money on a straddle you want the stock to go up or down by more than that percentage, the more it changes the better.
So if you believe that the matter will be resolved one way or the other by whatever date then you'd want to buy a Straddle on that date. Regardless of what happens if there is resolution by that date you'll make money.
A Strangle is the same thing but allows you to bet directionally which way the stock will move. So if you're confident the matter will be resolved by a certain date then you can buy a strangle for that date and weight it depending on the outcome you think is most likely (say if you're 60% confident the court will for Elon to pay the agreed upon price you can weight the strangle 60% towards the upside). Like the straddle as long as there is resolution you'll get paid regardless, but here you get a bigger payout if you guess the direction correctly.
Both of these can be inverted with short straddles and short strangles.
This is what you would want to purchase in the case you're talking about. If you're confident that the Twitter matter won't be resolved for a month then you can purchase a short straddle for a month from now at whatever range you feel comfortable better the twitter stock will stay between.
A short strangle would allow you to do the same but with the boundaries weighted one way or another. So instead of just saying "it won't move more than x% either direction". It allows you to say, "a month from now it will be between $x and $y" where x and y can have a different distance from the current price.
how do you actually trade complex options like this? E-Trade or Robinhood or something? I'm sure I could get myself in a whole heap of trouble trading options, but it looks fun..
Yes. You can trade options like this using pretty much any brokerage including E-Trade and Robinhood. TD Ameritrade, Fidelity, Charles Schwab, etc.
I'd steer you away from Robinhood, not just for the sake of the meme culture that's developed around it, but because other platforms generally have better research tools and support.
With all of that said, jumping straight into options trading is a big leap to take and with active investing in general I'd encourage you to look at it not as 'investing' but as gambling.
If you're doing it for fun that's all good just don't bet more than you can afford to lose.
> On options losses are capped to the money invested.
On long options -- a purchased call, purchased short, or a combination -- then losses are capped to the money invested. On short options, losses are potentially unlimited.
Understanding the difference is obviously extremely important.
> Nevertheless, you should consider that a host of professional traders with much better equipment and connections are betting against you.
I'd rather suggest that professional and sophisticated traders are arbitraging against you. Options market makers are not usually in the business of taking a directional stance -- they don't care one way or the other about whether Musk will buy Twitter. Instead, they seek to sell you the option but buy back the risk more cheaply, beginning with dynamic hedging that is impractical for a single retail investor with limited capital.
You can sell a call and/or sell a put with the expiration and strike prices you think are appropriate. Maybe you'd buy covering calls/puts as well, forming a pair of vertical spreads (an iron condor or iron butterfly). There are different names for different basic combinations of options contracts: https://www.optionsplaybook.com/option-strategies/
I've been keeping a close eye on this market (TWTR options) and in my opinion, there were no great bargains. Especially with longer term contracts, you'd need to chip into wide bid-ask spreads, and the prices didn't offer stunning deals on either side of the trade, unless you held an extreme opinion.
Delaware may actually be relatively quick to rule on this. It’s a pretty straightforward breach of contract case, and one side has a much, much stronger position than the other.
Where it’ll get really interesting is if the court orders specific performance (as I expect them to do, if the case makes it to a verdict). Sure, EM has a legal obligation to comply and buy the company, but what if he just….. declines? He obviously doesn’t feel like rules or the legal system apply to him (sometimes for better, but increasingly consistently for worse) but I’m not sure that I see the Delaware chancery court sending men with guns to his front door to seize $44 billion.
