Add training workflow, datasets, and runbook

training_data/curated/text/874102f2037e48ec0d64730a6c9882227027a9ea3399700ba45fea2306f98bb1.txt

@@ -0,0 +1,40 @@
+450 Part IV: Additional Considerations 
+Problems arise if XYZ begins to fall below 45 well before the closing of the 
+merger, the lower "hook" in the merger. If it should remain below 45, then one 
+should set up the arbitrage as being short 0.556 shares ofXYZ for each share of LMN 
+that is held long. As long as XYZ remains below 45 until the merger closes, this is the 
+proper ratio. However, if, after establishing that ratio, XYZ rallies back above 45, the 
+arbitrageur can suffer damaging losses. XYZ may continue to rise in price, creating a 
+loss on the short side. However, LMN will not follow it, because the merger is struc­
+tured so that LMN is worth 25 unless XYZ rises too far. Thus, the long side stops fol­
+lowing as the short side moves higher. 
+On the other hand, no such problem exists if XYZ rises too far from its original 
+price of 50, going above the upper "hook" of 55. In that case, the arbitrageur would 
+already be long the LMN and would not yet have shorted XYZ, since the merger was 
+not yet closing. LMN would merely follow XYZ higher after the latter had crossed 55. 
+This is not an uncommon dilemma. Recall that it was shown that the acquiring 
+stock will often fall in price immediately after a merger is announced. Thus, XYZ may 
+fall close to, or below, the lower "hook." Some arbitrageurs attempt to hedge them­
+selves by shorting a little XYZ as it begins to fall near 45 and then completing the 
+short if it drops well below 45. The problem with handling the situation in this way 
+is that one ends up with an inexact ratio. Essentially, he is forcing himself to predict 
+the movements of XYZ. 
+If the acquiring stock drops below the lower "hook," there may be an opportu­
+nity to establish a hedge without these risks if that stock has listed options. The idea 
+is to buy puts on the acquiring company, and for those puts to have a striking price 
+nearly equal to the price of the lower "hook." The proper amount of the company 
+being acquired (LMN) is then purchased to complete the arbitrage. If the acquiring 
+company subsequently rallies back into the stated price range, the puts will not lose 
+money past the striking price and the problems described in the preceding paragraph 
+will have been overcome. 
+Example: A merger is announced as described in the preceding example: XYZ is to 
+acquire LMN at a stated value of $25 per share, with the stipulation that each share 
+of LMN will be worth at least 0.455 shares of XYZ and at most 0.556 shares. These 
+share ratios equate to prices of 45 and 55 on XYZ. 
+Suppose that XYZ drops immediately in price after the merger is announced, 
+and it falls to 40. Furthermore, suppose that the merger is expected to close some­
+time during July and that there are XYZ August 45 puts trading at 5½. This repre­
+sents only ½ point time value premium. The arbitrageur could then set up the arbi­
+trage by buying 10,000 LMN and buying 56 of those puts. Smaller investors might 
+buy 1,000 LMN and buy 6 puts. Either of these is in approximately the proper ratio 
+of 1 LMN to 0.556 XYZ.