Firstly, congrats if you have bought $Activision Blizzard(ATVI)$ before Microsoft's planned acquisition. However are you still holding and waiting for your payday? Are you worried that the stock seems to be dropping bit by bit everyday? Why aren't people scooping up the stock at $79 when there is at least $16 of upside to $95?

Technically speaking, the price is "overstretched". If you believe in your Bollinger Band, you will know that price will always be pulled back to the middle of the band. Fundamentally speaking, people are worried whether Microsoft can pull off this deal and are taking profit first. Just look at the strong selling volume on the day when the news broke. This deal is still subject to regulatory approval which will take at least 6 months to 1 year and it is not a guaranteed deal.

So how? What should you do? There are 2 ways to manage it.

1) Sell the stock and buy a 16/Sep/2022 $85 call option which closed at $2.33 on 27/Jan/2022. Even a $80 call option with the same expiry cost only $4.20. Assumed you bought at $65, sold at $79, you will pocket $14. You pay $4.20 for Sept $80 call option and if the deal goes thru, you pocket $95 - $80 - $4.20 = $10.80 plus the earlier $14 when you sold the stock. If the deal fails, I am sure price will fall back to earth and maybe even worse than $65, but you will still pocket $14 - $4.20 = $9.80.

2) Buy a 16/Sep/2022 $75 put option at $3.00. Treat it like an "insurance". If the deal pulls thru, you collect $95 - $65 - $3 = $27. If the deal fails, you collect $75 - $65 - $3 = $7.

Either way, it is all about controlling risks. The LAST thing that I WON'T do is to write put options and collect "premium" thinking that this deal is GUARANTEED to go thru. I have seen people recommending it however your risk is LIMITLESS if this deal fails. You will be holding very expensive stock and by the way, 2022 doesn't look like it is going to be a good year for tech stocks.

So guys, be careful, always take your profit and manage your risk because pigs get slaughtered in the market. Good luck!


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