In this blog, we suggested early on that the rumor of Mark Hurd joining Teradata (TDC) was senseless. We have been lightly scaling in a short position in TDC. As big institutional money and hedge funds bought into the rumor, TDC price has been running up.
This weekend , there are several stories in the press that Hurd is going to Oracle (ORCL). We have no independent verification, but the stories make sense. Tomorrow morning, we suggest becoming aggressive in short selling TDC including adding to the short position in the pre -market.
We do want to caution that it will be easy for the trapped longs in TDC to start a new rumor that With Hurd at ORCL, ORCL is about to buy TDC. Our analysis shows that such a move on part of ORCL will not be a rational move. However, at times buyers do act irrationally. To reduce risk, we suggest twin strategies.
Hedge the core position with options. A proper combination of strangles and iron condors should finance the hedge at very low cost.
Take profits often during the intraday swings on non core part of the position.
Should ORCL spike on the news, we will sell short ORCL for a short term trade.
