BAE (BA/) ... merger gamble

Friday last I bought some Dec calls in BAE Systems (BA/, mkt cap £10.9bn). The strike is at 360p/shr and compares to today’s price at 334p/shr. BAE is in merger talks with EADS (EAD, mkt cap €21.2bn). I have no idea whether the merger will go through or on what terms. As the politicos are involved it is likely to be a tortuous process. However, there is a slim chance that Lockheed (LMT, mkt cap $30.2bn) or A N Other may pounce. In that event, BAE goes to 400p/shr in the blink of an eye. And the calls reap a 40p+ gain. Seeing as the price on the calls came to 3.8p, the risk seemed worth taking. I bought a few. They now trade at 5.3p and rising.

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