Merger Arbitrage Hedge Fund Strategy ― How Does it Work?

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  • čas přidán 12. 09. 2024

Komentáře • 130

  • @PBoyle
    @PBoyle  Před 3 lety +26

    Thanks to our growing list of Patreon Sponsors and Channel Members for supporting the channel. www.patreon.com/PatrickBoyleOnFinance Moe Amrane, David O'Connor, Christian Richards, Zak Patterson, Ki Ryu Chan, Pjotr Bekkering, Drew, Ivaylo Kunev, Alex, Robert W Proudfoot, EatEmAll, Michael Boensel, Adrian Phang, pooh shmoo, Ron Hughes, Robert Muller, Andre Michel, Ivan Iliev, Gopaljee Atulya, Milan Tomic, Mark Hooker, Artem Vasenin, P H, Mathews Sebonego, Sebastian, Michal Lacko, Erik Montesinos, Matthew Loos, Az Indragiri, Robert Proudfoot, SK, Aman Bali, Lautaro Parada, Pratap, Deborah Joseph, Robin Sung, Kurt Johnston and Kaushik Vankadkar

  • @craigspencer4306
    @craigspencer4306 Před 3 lety +151

    Coffeezilla brought me here. I know nothing about finance and I understood everything you explained. Amazing

    • @udayhomeful
      @udayhomeful Před 2 lety +2

      Much better to be here than listening to 4 stooges.

  • @kylejf9059
    @kylejf9059 Před 3 lety +61

    Said it before and I'll say it again, nothing like listening to a professional who makes a complex system and strategy make sense very easily. These are the people you learn from (even if you don't apply the lesson you pick up the understanding).

  • @tedigjoleka8420
    @tedigjoleka8420 Před 3 lety +41

    As an IB professional, I have to say you deliver some of the best capital markets information on CZcams in a matter that can be easily absorbed and well understood by non-finance professionals.

    • @IronMan-ch7de
      @IronMan-ch7de Před 3 lety +3

      IB= Investment Banker?
      How did you get your Job?

    • @lhourigan1
      @lhourigan1 Před rokem +1

      You forgot his comedic timing.

  • @san7908
    @san7908 Před 3 lety +56

    As usual patrick, amazing content, keep it up!.

    • @PBoyle
      @PBoyle  Před 3 lety +1

      Much appreciated!

  • @gumbobanana185
    @gumbobanana185 Před 3 lety +18

    This is the exact type of finance videos I have been looking for... Keep it up!

  • @tedchou12
    @tedchou12 Před 3 lety +4

    my screen cracked because I was hitting the like button with so much enthusiasm.

  • @cole6167
    @cole6167 Před 2 lety +4

    It cannot be said enough how valuable the content is on this channel!

  • @a_doggo
    @a_doggo Před 3 lety +10

    Merger arbitrage is fun until you realize TD charges a $38 "reorganization" fee, I have to make bigger bets to offset that one. Was nice knowing you, Vivint Solar.

  • @stevo4535
    @stevo4535 Před 3 lety +5

    Great content. I noticed at the end the talk about the like button but it was after the whole video and alot of ppl might have already left. Watch a few videos from Gram Stephan and you can see how he incorporates that very early on.

  • @gumerzambrano
    @gumerzambrano Před 3 lety +2

    Keep up the amazing videos man! Can't wait to see you make a video next week regarding how the market is going to react to the election 🤘🏾

  • @MrKoolboosi
    @MrKoolboosi Před rokem

    I was a meger arb trader for us and Europe markets. This by far is the best introduction i can recommend to rookies in the field. Kudos 👍

  • @ronniedelahoussayechauvin6717

    Impaired💯

  • @luckylee3204
    @luckylee3204 Před 3 lety +7

    Thanks again for taking the time and effort to put this lecture together for us.

  • @amsalmeron
    @amsalmeron Před 3 lety +3

    Man, your videos are so good. Thanks for sharing all this knowledge!

  • @ivan_says_hi
    @ivan_says_hi Před 3 lety +3

    Hi Patrick! I love your videos so much I talk about them all the time with my friends. All the information is so well explained and I appreciate the humor you sneak in here and there!
    I keep telling so many of my friends "if only you understood English I could link you this amazing video on X or Y". Damn shame that some people just never bothered to study English when they where young and now it feels like its too late for some of them xD

    • @PBoyle
      @PBoyle  Před 3 lety +1

      Thanks Ivan, I'm glad you are enjoying them.

  • @MrEstrax
    @MrEstrax Před 3 lety +5

    Patrick always delivers on the content and substance of these videos! Thanks! Keep it up!

  • @Theopenwindowmaniacs
    @Theopenwindowmaniacs Před 3 lety +4

    Very educational video. Love your content, Patrick!

  • @dynomik
    @dynomik Před 3 lety +3

    You sir are like noone out there, as I am on markets since over 17 years now nevertheless I listen to you mate and feeling like a greenhorn :D Awesome mate, simply awesome, thank you so much for sharing it here! Deep respect and many thanks

  • @tonandino9419
    @tonandino9419 Před 3 lety +3

    This video is so informative it is actually ubelievable. Like seriously, amazing job

    • @PBoyle
      @PBoyle  Před 3 lety +5

      Thanks, I am slightly surprised that it is one of my worst performing videos in terms of views.

    • @tonandino9419
      @tonandino9419 Před 3 lety +1

      @@PBoyle I was surprised too. Such a shame youtube doesn't recommend these more.

  • @ValeStuff
    @ValeStuff Před 3 lety +8

    Hey Patrick, great video. I'm still going through some of the books you recommended and I'm on Fiasco where Frank's talking about the Ajustabonos. I think a video talking about all the banks trying to get into the Mexican/Latin American markets in the '90s would be interesting.

  • @jonathanstone4308
    @jonathanstone4308 Před 3 lety +3

    Interesting topic and watching it play out now on one of my investments. As a retail holder who bought a long time ago it's helping see a fair price being paid for the takeover. Definitely some questionable trades though very much verging on insider trading.

  • @RiekusVellema
    @RiekusVellema Před 3 lety +5

    Thanks for this lesson👍

  • @neuvocastezero1838
    @neuvocastezero1838 Před 7 měsíci

    I don't know if you script these presentations beforehand and read them from a prompter, or just know the material so well and have such a gift or level of training for conversational discourse that you do not need to say "um" ore "uh", ever. Either way the videos are impressive, but for the latter case, even more so.

  • @tribalartcollector
    @tribalartcollector Před 3 lety +4

    I liked this video very very carefully

  • @blackopal3138
    @blackopal3138 Před 3 lety +3

    What a great video to stumble on. I've been doing this since I started trading, but haven't even thought to look for a vid on it. What would I look for if I didn't know it was a named strategy, right. I keep telling people, cz it seems like easy money. My experience has been alot better than 2-3% tho. I did Husky-Cenovus, made like 40-50%. Husky dropped a lot after the announcement, cz of the oil crisis, I guess, I could have made another 25% if I held 1 more day, then they evened out. And right now I'm all-in levered 3x for KCS-CN rail merger, lol. Only to make about 25% tho.
    I am not doing the shorting part, I'm not sure I follow why I should do that. I just watch the deal like a hawk, 3 companies, 2 offers, the US STB, twice a day, news, prices, etc.
    And I am relying on a voting trust, where I believe it means we will get paid right away if the there is an agreemnet made??? Is that correct, Patrick? ty
    peace

  • @boneheadmck
    @boneheadmck Před 3 lety +2

    Just come across your videos. Very well done.

  • @rickymherbert2899
    @rickymherbert2899 Před 2 lety

    I've always been fascinated by this sort of financial "black magic" but struggled to understand any of it. However, since your channel was suggested to me, I'm now beginning to see some light at the end of the tunnel. Helped by your clear, understandable explainations Patrick and you've got another sub. The summing up overview at the end of each video is excellent.
    ps. Glad to see your tie and pocket hankerchief don't match. Sign of man with classic, good dress sense. 👍

  • @donl1279
    @donl1279 Před 3 lety +2

    I still don't understand where the spread comes from? In a stock deal, when you long the target's stock, you make money from the increase of the stock price if the deal is successfully closed. When you hedge with a short position at 3.5 shares, you lose money accordingly.

  • @hunter4243
    @hunter4243 Před 3 lety

    I have ever heard of this until today. Good job on the video!

  • @bjjrhino
    @bjjrhino Před 3 lety +4

    Thank you Patrick a very informative video

    • @PBoyle
      @PBoyle  Před 3 lety +1

      Glad you enjoyed it

  • @VinylMemoirs
    @VinylMemoirs Před 3 lety +4

    Question for Patrick or anyone with MA knowledge.
    Are there any investors or hedge funds that specifically trade deal breaks? So pretty much do the opposite of what is said in the video. If you can have a superior knowledge of which deals would break, surely this would be profitable? are there any funds that specialise in shorting the target stock?

  • @user-vk8vu4li2x
    @user-vk8vu4li2x Před 11 měsíci +23

    After a terrible 2022, shell-shocked financial backers have a lot to think about and losses to recover from. An expansion report and a wealth of other data did little to alter assumptions that the Central bank would likely keep raising interest rates regardless of whether the economy slows down. This implies that portfolios will experience more losses during the first quarter of 2023. I'm currently at a crossroads deciding whether to exchange my $250k security/stock portfolio; how might the continuous market volatility work to my advantage?

    • @user-zw7cd7pe4u
      @user-zw7cd7pe4u Před 11 měsíci

      Concentrate on two main objectives. First and foremost, keep yourself safe by knowing when to sell stocks to reduce losses and maximize gains. Second, prepare yourself to gain from a market turnaround. I advise you to seek the advice of a representative or financial counselor

    • @user-vk8vu4li2x
      @user-vk8vu4li2x Před 11 měsíci

      @@user-zw7cd7pe4u In fact, ever since Coronavirus, I've been in regular communication with financial examiners. Nowadays, buying moving stocks is quite easy; the trick is knowing when to buy and when to sell. The section and leave orders for my portfolio are made by my counsel. accumulated more than $550,000 from a $150,000 savings that was initially stale.

    • @user-zw7cd7pe4u
      @user-zw7cd7pe4u Před 11 měsíci

      @@user-vk8vu4li2x Please provide the information for your investment advisor here. I really need it now.

    • @user-vk8vu4li2x
      @user-vk8vu4li2x Před 11 měsíci

      @@user-zw7cd7pe4u She is KRISTIN GAIL CUNNINGHAM , my consultant. Since then, she has devoted section and leave attention to safeguards that I have been keeping an eye out for. You can locate information about the chief online, on the off chance that you're interested. I made no regrets about substantially adhering to their exchange strategy.

    • @user-zw7cd7pe4u
      @user-zw7cd7pe4u Před 11 měsíci

      @@user-vk8vu4li2x sincerely thank you I looked her up on the internet and was awestruck by how qualified she was; I contacted her since I need all the help I can get with canning. I've just scheduled a call.

  • @taylor_o
    @taylor_o Před 3 lety +2

    Excellent explanation

  • @cybernoob1856
    @cybernoob1856 Před 3 lety +1

    Great explain....
    If anybody is interested in looking at a practical example of a merger arbitrage at the current market scenario you can take a look at the FUTURE GRP stocks which is a combination of companies such as FUTURE RETAIL FUTURE SUPPLY CHAIN etc.... Traded at NSE and BSE and is taken over by the RELIANCE INDUSTRY led by Mukesh Ambani and the level of uncertainty is brought by its opposing party AMAZON led by Jeff Bezos

  • @alka3341
    @alka3341 Před 3 lety +1

    Great video, as usual. Thank you! An idea for a video: it may be interesting to do a video on long/short macro strategy and how such investors structure their long-short spreads to hedge market and sector risks and, of course, the risks involved in this strategy...

  • @mdkhaledhasan8059
    @mdkhaledhasan8059 Před 3 lety +5

    Good content

  • @kurtalder1622
    @kurtalder1622 Před 3 lety +1

    Subscribed!

  • @IntenseRampage
    @IntenseRampage Před 2 lety +1

    Patrick, at 21:42 did you mean this strategy has an absolute return of 3% per year, or 3pp on top of the market on a good year? So for 2021 when the market was up~30%, this strategy would be produce 33%?

  • @fuhat1040
    @fuhat1040 Před 2 lety

    great video . i got into the market via this and I didn't even know this my favorite stragety.

  • @treysuarez2385
    @treysuarez2385 Před 3 lety

    We need more people like you . thank you so much !

  • @MorrisDugan
    @MorrisDugan Před 2 lety

    The failed Qualcomm-NXP merger about 5 years ago is an example of the uncertainty of a merger actually going through. The situation dragged on for about two years before the deal got nixed by Chinese regulators.

  • @alibizzle2010
    @alibizzle2010 Před 3 lety +5

    Maybe a video next on event based arbitrage? I'm thinking about something like a court case that impacts a stock price

  • @alibizzle2010
    @alibizzle2010 Před 3 lety +10

    Is "expertise" the same as mates giving info to mates?

  • @roym1444
    @roym1444 Před 3 lety +2

    Is there any advice you can give to be able to decypher the news when it comes to these merger events. What are usually the catalyst that causes them to fall through?

  • @RalphMaruva
    @RalphMaruva Před 3 lety +24

    ah this man has too much knowlegde. he's like a textbook. lol, talks and talks complex things without stopping wow

    • @Kid_Ikaris
      @Kid_Ikaris Před 3 lety +5

      That's why he's gotta get it out! Appreciate every word I've heard from this man.

    • @baz1184
      @baz1184 Před 3 lety

      His book "Corporate Finance" that he mentions is actually used as a university textbook. Goes to show that he is great at teaching concepts.

    • @veerkar
      @veerkar Před 3 lety

      And trust me - this is the version for Dummies. I have a Masters in Financial Engg from a top college and being doing this sort of stuff for 18 years - and I can tell you this man is really really good at this stuff.

  • @karansaxena976
    @karansaxena976 Před 3 lety +1

    Patrick you are great

  • @SneakerKlev
    @SneakerKlev Před 3 lety +6

    how does jason statham have the time to be a hedge fund manager And a youtuber?

    • @crimpers5543
      @crimpers5543 Před 3 lety

      hedge fund manager is an easy job.

    • @crimpers5543
      @crimpers5543 Před rokem

      @@ProfAzimov already did since posting that comment.

  • @jasonmcpherson376
    @jasonmcpherson376 Před rokem

    Very good video!

  • @tiendoan1333
    @tiendoan1333 Před 3 lety +2

    What do you think about arbitrage ETF such ARB?

  • @alibizzle2010
    @alibizzle2010 Před 3 lety +4

    Handy if your firm also has a M&A department ;)

  • @liemh9290
    @liemh9290 Před rokem

    Patrick make complex financial concepts understood by my simple brain

  • @somindrag
    @somindrag Před 3 lety +3

    Excellent content. I have 1 question though. What is the role that derivatives, i.e. both futures and options play in bringing down the risk of the hedge funds when they decide to get involved in this sort of trade. Appreciate if you can share a short note on this.

    • @skdx1000
      @skdx1000 Před 3 lety

      if you purchase shares or calls with the expectation a company maybe purchased (given some of the acquisition sentiment is priced into the current share price), you can then sell covered calls to limit the downside of a potential opposite movement and in the case if you purchase calls with the same expectation and if there is a probability the deal may not go through, the movement in either direction will likely be quite large in which you can use an options straddle where you think the movement will exceed a certain amount (i.e you buy calls and puts depending on how big you think movement will be in either direction) and therefore potentially make money on either side but not both if the movement is indeed large enough. you will however lose all the initial investment if the movement in either direction is not large enough. Hope this provides some insight into your question.

    • @somindrag
      @somindrag Před 3 lety

      @@skdx1000 Thanks for this very lucid explanation. Much appreciated.
      However, taking this a bit further, how does selling a OTM strangle work vis-a-vis buying the ATM straddle/selling covered call combo mentioned above. I believe this might bring in a net credit (with perhaps more money involved in putting down margin) but not sure how hedge funds build their derivatives strategies for this sort of transactions when multiple choices are available. To be more specific, do they go in for a net credit or a net debit approach. Appreciate if you can throw some light on their thought process here.

    • @skdx1000
      @skdx1000 Před 3 lety

      @@somindrag i think the answer to this is situational and has much to do with the analysis of the parties involved and the fundamentals in a finance sense. The best strategy is up for debate. In some cases based on risk parameters and various statistical analysis or even position size, liquidity, etc has an effect on this decision. For different options strategies the time-value of money will be different so you are essentially looking at the absolute position you would like to take and from that build a payoff matrix of the strategies available and have a black box function that calculates the opportunity cost for each possible strategy and then pick the one that fits with your funds investment philosophy (this is highly variant and is why there are so many funds and why risk measurement and opportunity cost is a forever ongoing topic of research)

  • @TheFlyingE
    @TheFlyingE Před 3 lety +1

    Thank you

  • @harbirmangat1043
    @harbirmangat1043 Před 3 lety +3

    Do short positions need to be covered prior to a merger?

    • @samsonsoturian6013
      @samsonsoturian6013 Před rokem

      In a share for share deal, you will receive shares that will cover your shorts

  • @hawtwax
    @hawtwax Před 2 lety

    Fantastic video!

  • @shaileenshah3966
    @shaileenshah3966 Před 3 lety

    I'd happily run to college everyday if had more professors like him.

  • @slymanmustafa134
    @slymanmustafa134 Před 2 lety

    Great video!
    Have a couple of questions to ask. When it comes to mitigating the risks of a deal being canceled, do you believe that purchasing a put option is the best way to go?
    Also, when it comes to returns. Do you believe that a 35-40% return on this strategy is feasible on a small capital of less than a million?

  • @nickjames4861
    @nickjames4861 Před 3 lety +1

    How do arb investors hedge their downside in a cash deal?

  • @LocalChum
    @LocalChum Před 3 lety +4

    second

  • @ngvoonchuan5302
    @ngvoonchuan5302 Před 3 lety +1

    Is it a good idea to buy call option on acquiree to capture the remaining upside while having a limited losses if contract breaks?

  • @johnsmith-uk7yf
    @johnsmith-uk7yf Před rokem

    you didnt elaborate on how long would it take for the deal to close. its fine nothing can be done about it now.

  • @nathansfreedwell982
    @nathansfreedwell982 Před rokem

    it was predetermined that I would nestle crunch my way through the situation

  • @TIO540S1
    @TIO540S1 Před rokem

    In the stock deal, why can’t I just buy Spotify and then, when I receive the 3 1/2 shares of Apple at deal closing, sell them? I know there’s market risk but that’s also true if I’m short Apple. I don’t see why I have to short Apple to get the up front $380. I don’t get the up front $380 in the cash deal.

  • @PerfectlyFriedBread
    @PerfectlyFriedBread Před rokem

    Just finding your videos now. I think a follow up to this video using the Activision blizzard king and Microsoft acquisition as a case study would be really interesting and would do well on CZcams. I say this having found you through asmongold.

  • @johnc.7594
    @johnc.7594 Před 3 lety

    Legend!

  • @vernedavis5856
    @vernedavis5856 Před 2 lety

    buy all rights and related to Laugh-In & reboot

  • @rickiandavis
    @rickiandavis Před 2 lety

    do cameo on a reboot of Laugh-In

  • @zacharyjiminez8315
    @zacharyjiminez8315 Před 3 lety

    Patrick what’s your take on CCIV potential merger with Lucid?

  • @hmanthe6th155
    @hmanthe6th155 Před 3 lety

    Hey Patrick! I am 19, and have been investing all the money I’ve saved while in highschool/college- I was wondering if you had any tips for a new investor. I have an opportunity fund of about $2000 and I would greatly appreciate if you had any advice for what to do with that money. Love the content!

  • @urinater
    @urinater Před 3 lety +2

    Care to share your view on Anton Kriel and his institute?

    • @PBoyle
      @PBoyle  Před 3 lety +3

      I don't really know much about the quality of his classes, but I don't really think it is ever a good idea to pay someone to mentor you, and I get the feeling that is core to his business.

    • @urinater
      @urinater Před 3 lety

      @@PBoyle thank you for your answer. I agree.

  • @thomasfinnerty9420
    @thomasfinnerty9420 Před rokem

    Very interesting, I am a fellow Irishman. How can I get into trading with someone trustworthy

  • @TomBreedon
    @TomBreedon Před rokem

    Genius

  • @thehackerworkouts1873
    @thehackerworkouts1873 Před 3 lety +1

    Hi..
    Is that Arbitrage M&A Trader is the same expertise as Arbitrage/Leverage Trader that making PROFIT using buy/sell Financial Instruments ( Swap, Derivative,etc ) & Bank Instruments ( MTN, Bond, etc ) ?
    Also is that Private Equity Trader and Hedge Fund Trader with Family Office mostly making THEIR PROFIT from Private Placement Program / PPP ?

  • @jonatannystrom7203
    @jonatannystrom7203 Před 3 lety

    Think you made a mistake when discussing the graph of returns. In the bottom the green line is bank indices and blue is hedge funds

    • @PBoyle
      @PBoyle  Před 3 lety

      yes, you are right.

  • @kokojambo4944
    @kokojambo4944 Před 2 lety

    I would like to ask a noobie question- what is the name of the strategy centred around making profits from takeovers by buying beforehand?

  • @roc7880
    @roc7880 Před rokem

    i think that this tactic killed Boesky in the end

  • @nibbel94
    @nibbel94 Před rokem

    No memes? Patrick has changed

  • @ivanwon6370
    @ivanwon6370 Před 3 lety +1

    Who is also here waiting on CCIV to merge ?!

  • @sUmEgIaMbRuS
    @sUmEgIaMbRuS Před rokem

    Isn't 'arbitrage' defined as a _risk-free_ trading opportunity? Nothing described in this video meets that definition. This is a _low-risk_ trading strategy, but not a _risk-free_ one.

    • @CrownedWithLaurels
      @CrownedWithLaurels Před rokem

      The term arbitrage really has two meanings depending on context - in academic/theoretical context it refers to a truly risk-free transaction (as in, buy low and sell high at the exact same instant with zero execution risk). In practical use it just has the common meaning of taking advantage of price differences across markets (or, in risk/merger arbitrage, across time) in various ways which are generally low risk but not truly risk-free, because in the real world execution risk, counterparty risk etc. are always present in some form.

  • @devanshsinhal3490
    @devanshsinhal3490 Před 7 měsíci

    leeeeevrred

  • @AliceHh_
    @AliceHh_ Před rokem

    I find myself at a crossroads, uncertain whether to liquidate my $150,000 stock portfolio. I'm seeking advice on the best strategy to capitalize on this current market.

  • @boringmanager9559
    @boringmanager9559 Před rokem

    I almost broke the screen on my phone

  • @andrewvare3173
    @andrewvare3173 Před rokem

    UAL 1989.

  • @alphaomega1089
    @alphaomega1089 Před 2 lety

    Before I listen to this video need to say: he has something here; just listen.

  • @chakigun
    @chakigun Před 3 lety +1

    TRY NOT TO BREAK THE SCREEN :(((( patrick why aren't you in comedy

  • @danielarce3256
    @danielarce3256 Před 3 lety

    Can i work in your hedge fund?

  • @Walker956
    @Walker956 Před rokem

    dont assume people watch your video on your phone.

  • @arrabuscrakkusberillion4424
    @arrabuscrakkusberillion4424 Před 4 měsíci

    I can see your lips moving but I can't understand anything

  • @imposterimpossible1580

    Thanks for the great content Patrick. I heard about your channel through your interview with Coffeezilla and have been hooked ever since. You have a way of explaining things in a well organized and clear way that I really appreciate.

  • @silvergalaxie
    @silvergalaxie Před 2 lety

    reboot laugh-in. have reg cameos of warren buffett