A Smart Arb Play

Shares of Motorola Mobility Holdings MMI have been grinding lower throughout the session; currently, shares are off by 0.50%, trading at $38.67. Today's trend echoes the past few weeks, where shares have been seeing selling interest in any sizable pop. The $39.00 appears to be significant short-term resistance in MMI, but options traders remain adamant that shares will tick higher over the next eight weeks. Earlier in the session, the Mar2012 $38.00 call was purchased 10,000 times, on the offer, for $1.50-1.55. Given the fact that Motorola Mobility Holdings is to be acquired by Google GOOG for $40.00 per share in cash (expected to close around 02/15/2012), this looks like a very smart play. Traders with time to wait and money in their pockets should consider the trade. The March 2012 $38.00 call can now be bought for $1.45, which, given the expected per share takeover price, would yield $0.55, +37.93%, on under 46 days. That is a yearly holding period equivalent of over 300%. While the overall premium gain will be less than if you purchased shares ($0.55 versus $1.33), so is the overall capital at risk. Motorola Mobility Holdings, Inc. is a provider of technologies, products and services that enable a range of mobile and wireline digital communication, information and entertainment experiences.