Terra Industries (TRA) rejected CF Industries’ Holdings (CF) enhanced proposal of $29.95 cash plus 0.1034 shares of CF stock. This is not, however, the reason the shares look like they are down dramatically today.
The stock is trading ex a special $7.50 dividend, which is why it appears to be down more than $8 on many market data vendors.
In actuality, TRA is only lower by about 50 cents. Be aware that the special dividend is now part of the deliverable for all option contracts. Investors who are long an at-the-money call will receive 100 shares of TRA stock plus $750 dollars per contract. This essentially makes the stock price for determining in- and out-of-the-money the same as 7 dollars and 50 cents higher than the actual stock price. Be careful not to sell out options below parity!
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