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.