This post was just published on ZYX Buy Change Alert.
Super computer maker Cray (CRAY) has a $35 cash buyout offer from HPE. There is a 35% probability of a higher bid. In case of a bidding war, price can go as high as $45. Normally a 35% probability does not generate a buy signal. However here there is a 95% probability that the deal with HPE will close at least at $35. This makes the probability adjusted risk reward favorable.
CRAY is trading at $35.21 as of this writing. The buy zone is $34.20 to $35.26, preferably on dips below $34.76. Consider limiting the quantity to 30% of full core position size. The mental stop zone is $32 to $33.23.
Caution: There is no free lunch. Consider not going overboard with the quantity because there is a 5% probability of the deal not closing. If the deal does not close and there is no higher bid, the stock will likely open gap down and a stop loss may not protect you.
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