Dollar Tree DLTR – Family Dollar FDO, Another Spread Forced Into Early Retirement

Family Dollar received a $7.8 billion takeover offer from Nelson Peltz.  This offer effectively puts all grocers and discounters in play.  Some tickers to watch: DG, BIG, BG, NDN, KR, SWY, SVU. Peltz is no stranger to Family Dollar, having purchased roughly 8% of the outstanding shares back in July 2010.  Unfortunately I was not long FDO to participate in the rocket ship ride upward, even though I was consistently long FDO and short DLTR when I traded this spread in the past.  Oh well.

Should this takeover actually go through, which it most likely will, I will have to retire one of my favorite spreads, DLTRFDO.  The volatility characteristics and relative predictability of this spread made it one of my favorite spreads to trade.  As of now, I’m deleting the pair out of my computer program so I don’t get distracted by it.

I’ll be pouring one out for this spread later tonight.

Further reading:

Family Dollar Surges After Peltz’s $7.6 Billion Takeover Offer (Bloomberg)

Playing Earnings – Zero or Hero (Dynamic Hedge)

DLTR FDO Earnings Play — UPDATE (Dynamic Hedge)

DLTR FDO Earnings Play — Third and Final UPDATE (Dynamic Hedge)

DLTR – FDO Trade Complete (Dynamic Hedge)

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