Merger Arbitrage
Instructions
Use the Merger Arbitrage window to create a combination order for an anticipated merger between two companies.
To navigate to this tool, please take the steps outlined below.
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For Mosaic - Click the New Window button in the top left corner and select Merger Arbitrage.
For Classic TWS - Click the Trading Tools button across the top of the page and select Merger Arbitrage.
1 - Enter the symbol of the company being acquired (the acquiree) in the first field, and the acquiring company in the second.
2 - Finish defining the conversion ratio. The share size of the acquiree is always "1".
3 - Enter additional cash amount if applicable.
4 - Enter a dollar amount or percent of the last price of acquiree's stock as the desired profit.
5 - Enter the quantity of acquiree shares you want to purchase. TWS will calculate the size of the actual combo order based on the conversion ratio you entered.
6 - Create the order on a trading page, or elect to manage the order in one of our sophisticated algo trading tools: Accumulate/Distribute or ScaleTrader.
To Create a Merger Arb Combo
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Enter contract conversion information in the Contract Selection area.
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In the Order Selection area, enter the desired profit as an absolute amount or a percent of the last price of the stock of the company being acquired (the acquiree).
Note: Pink fields are required.
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Click Create Order to create a combination order line on the trading screen. You can also choose to manage your order from within one of our advanced algo trading tools, Accumulate Distribute or the ScaleTrader.
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The Scale market and order display feature scales the market data to display the price of the combination per share of acquiree, and the order price will also be entered and displayed in these units. This is checked by default. Note that if the calculated size of the acquiree is one, this checkbox has no effect.
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The remainder of the Accumulate Distribute window allows you to specify detailed and sophisticated order management criteria to help ensure that you receive the best price without being noticed.