Armagedon

Using the Regional Banking ETF to Play Bank Mergers

This is a silly article. How can you profit in an merger arbitrage by holding an ETF of the sector? Merger abritrage generally requires you to short the acquirer and long the target. This is because merger arbitrage is a ZERO SUM GAME. If you hold the ETF you both hold the target and the buyer = no gain

Maybe what the author intended to say is that if you buy the ETF you will benefit from a strengthening of regional banks through mergers... Unfortunately, this too does not make sense as the same principal applies.

The only way for this trade to work would be if large banks came and purchased the regionals at ABOVE market prices (not the now so popular take-under). Unfortunately, banks have no intention or balance sheet to pay for the regionals.

Conclusion - This trade idea requires an important quality control review.

Using the Regional Banking ETF to Play Bank Mergers

This is a silly article. How can you profit in an merger arbitrage by holding an ETF of the sector? Merger abritrage generally requires you to short the acquirer and long the target. This is because merger arbitrage is a ZERO SUM GAME. If you hold the ETF you both hold the target and the buyer = no gain

Maybe what the author intended to say is that if you buy the ETF you will benefit from a strengthening of regional banks through mergers... Unfortunately, this too does not make sense as the same principal applies.

The only way for this trade to work would be if large banks came and purchased the regionals at ABOVE market prices (not the now so popular take-under). Unfortunately, banks have no intention or balance sheet to pay for the regionals.

Conclusion - This trade idea requires an important quality control review.