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Ideas for LEAPs on binary outcomes


blainehodder
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I was hoping we could start a thread of LEAP ideas which are potentially mispriced due to the binary nature of of the underlying.  Any ideas?  Here is a thought to get started:

 

-Could Chinese stocks be good LEAP candidates?  Tons of cheap stocks on the radar which are either outright frauds and worth nothing, or far too cheap.  Prob not a great idea, as even if they are cheap, the market may never recognize it.

 

-COCO - could fly if the gov reverses decision on title IV.  Alternatively, they could be in real trouble if the gov makes an example of them.... unfortunately the long dated options don't really trade.

 

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FMCN is a Chinese reverse merger currently being taken over.  (There are few others.)

 

You can bet against the merger arb by buying put options on FMCN.  In the unlikely event that the takeover doesn't close... presumably it will be because there is fraud.  (At least that's what the shorts hope.)  The stock will likely drop from either (A) concerns over fraud or (B) merger arb folks exiting their positions all at once.

 

The Bronte Capital blog is where I saw/stole the idea.

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