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I have a general understanding of how mergers and acquisitions work for symbols being traded in long positions. However, I am confused about how these events are calculated when shorts positions are involved.

Let's say symbol ABC is merging with XYZ. Merger ratio is 1:2 (1 of ABC for 2 of XYZ)

If I am long 10 ABC and long 20 XYZ, after the merger I would be long 20 on ABC.

What happens if I am...

short on ABC and long on XYZ?

long on ABC and short on XYZ?

short on ABC and short on XYZ?

flat on ABC and short on XYZ?

Ramasdf
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1 Answers1

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This is a basic algebra problem. The terms of the merger are:

(1) ABC = 2 * XYZ

Your first scenario was that you are:

(2) long 10 ABC and long 20 XYZ

You did the substitution of (1) in (2) and came up with the answer of:

(3) Long 20 of ABC

So why are you asking us to do this for four more scenarios?
As they say, do the math!

Bob Baerker
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