Trade Alert 11/5/2025

In class on Monday we discussed the buy-out of Kenvue (KVUE) by Kimberly Clark (KMB). Today, we have entered into an option trade to see if we can take advantage of some merger arbitrage. This does not have a great probability of success but the Reward/Risk is excellent. The details below. Buy to open:  KVUE March 20th, 2026 (monthly) 17.00 strike call (ratio of 1) Sell to open:  KVUE March 20th, 2026 (monthly) 20.00 strike call (ratio of 2) Buy to open:  KVUE March 20th, 2026 (monthly) 23.00 strike call (ratio of 1) Debit: 0.49 Max Risk = 0.49 or $49.00 per spread Max Reward = 2.51 or $251.00 per spread The buy-out price is $21.01 but that will fluctuate based on KMB stock. We have gone with a more conservative target at 20/share. If the stock were to push up to 21/share, that would still be a very profitable outcome.