Sirius' Short Story

4/14 - "With this merger, there are many reasons to short. While shorting equities is something that I personally am not prone to do, I do understand the concept and the market. I simply make a choice not to short very often. Specific to the merger, there is an arbitrage play that potentially has a lot of people shorting Sirius (SIRI). The strategy is to go long XM (XMSR) and short Sirius (this strategy requires that the merger pass). If an investor were to do this, they will basically lock in the arbitrage spread upon the merge.

With the Department of Justice already having issued their decision, it is almost a foregone conclusion that the FCC will at some point follow suit. Thus, there are many who like the guaranteed spread, and short Sirius while going long XM.

Another short strategy that has existed for quite some time comes from those with convertible shares. They short the stock to lock in the spread on their convertible shares. Most convertible shares are held by institutions."

"Time on a merger decision is likely quite soon. This will have shorts considering when to lock in their profits, but with all of those safety nets in place, they can still have a measure of confidence. At this point, they are trying to call the bottom, and realistically, the bottom is quite near to current levels.

For those that think the merger will solve the short situation… there will be short traders who will also try to call the top of the pop on an FCC announcement, and the cycle can start again. The solution is solid company performance, and a clear demonstration the profits are happening sooner rather than later. "