Re: OATS -- worth a gamble? (arbitrage bet)
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From what I gathered from reading through this, a merger arbitrage requires you to short the other stock to lock in the spread. Am I errant?
From what I gathered, he was making a value play based that he thought the deal was more likely to go through than the market. If he had shorted Whole Foods, it would have been a Merger Arb. Am I incorrect?
I'm just trying to learn the basics on this front.
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Yes. Merger arb (more commonly called risk arb, which is a horrible name) is always about making a bet that the deal is more likely to go through than the market. In a cash deal, you'd simply buy the target. In a stock deal, you buy the target, and short the acquirer (exactly the number of stocks that you would be left with from the other leg of the trade, should the deal go through).
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