SFD 6/30/13

SFD Note … Two schools of thought (Merrill Lynch)

SFD reports this morning. Bonds rallied both Monday and yesterday into this morning’s earnings – something we have not seen yet in 2013! I see two schools of thought for this bond going forward:

1)      The listed market is very high. The implied move for today is over 10%. Further, April 22/23 strike calls are still around 46 (mid market  49). The stock is trading right on strike and gamma is massive.

2)      There is a 40 day averaging period at maturity for this bond and holders lose some potential volatility surrounding the next earnings (6/8/13) as it is during the averaging period.

Given my inputs, I see bonds as fair.

SDF bonds mature 6/30/13.

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