CNBC's «Squawk Box» breaks down the latest headlines on Softbank's offer to buy Uber
shares at a big discount.
If the stock price moves up dramatically, a trader can use the call option to buy
shares at a big discount, while if the price drops far enough, the put option will instead turn a profit.
Not exact matches
If a company like iHeart gets in trouble and someone else want its assets, rather than buying the
shares, they often buy the debt (bonds and loans)
at a
big discount.
If you buy a quality business
at a
big discount to intrinsic value, you get the potential of a double dip — the gap to intrinsic value hopefully closes and then you can also benefit from the company compounding per -
share value over a number of years.
Assuming the
shares still trade
at a
big discount to NAV, it might make sense to take the distribution in
shares.
The
biggest caveat I could
share is that you are trading places with someone in a highly illiquid position, albeit
at a large
discount ideally.