Oilfield services company Baker Hughes Inc said on Monday it would buy peer BJ Services Co for $5.5 billion to broaden its product line and take on the industry's giants.
The price of BHI sunk by almost 7% in early trading. I believe the market is freaked out about the possibility that BHI is overestimating its ability to integrate the two companies and won't be able to realize its projected cost savings.
My play: I sold uncovered calls on BHI at 39 that expire this month. This limits my risk and any temptation I may feel to be more greedy. This buyout is not a done deal because the shareholders of both firms must still vote to accept it. Some other suitor could always come along and try to bid for BJS, so I'm not touching that side of the deal.