Options Trading Tutorial

How long should I wait before exercising options after an acquisition announcement?

My public company just got acquired. How long should I hold onto my vested options before exercising? In the months following the announcement and leading up to the closure of the acquisition, what is the 'typical' behavior of the target company's stock if the deal is well received? Some basic details: Purchase price: 2x market cap. The target stock went up 35% post announcement. Both companies up day after announcement. Very good fit/synergy between the two companies and deal will likely go through in 60-90 days.

Public Comments

1. If this is a significant % of your portfolio I would excercise some now to diversify. if there is much of a spread between current stock price and takeover price it means there is some uncertainty on street that deal willl close.
2. Deals always have a chance of falling through. Doesn't sound like it will here but you only gain the spread between the present price and the offer price while you risk somewhere around the 35% run up. Factor in the interest for the 90 days to closing and you have the risk/reward ratio.I suspect I would cash out now.