So, the talk is that UBS is being lined up to take over CS.
Given that markets are closed (well, not really, but, you know) we are free to speculate without anyone running off and putting the pension down on green or red.
So, the usual trade in a takeover is to buy the target, sell the buyer. They always overpay is the market reaction. So, CS at $2 (the US quote) and UBS at $19 (ditto). Buy CS and have an equal amount of money selling UBS short.
But that assumes that a bank, in extremis, takeover is like a normal takeover. Maybe the Swiss are going to claim that CS is headed for zero by Wednesday. Therefore UBS should pay 1CHF for the whole thing. At which point, obviously CS plunges and UBS soars having got a very grand deal there.
Or even, UBS gets CS for 1 CHF and everyone thinks this is Lloyds buying HBOS all over again and sells out of everything.
My belief – belief, on no inside knowledge at all – is that UBS has to pay a premium to the current CS price to clinch the deal. So, CS rises, UBS falls on announcement.
We’re about to find out, aren’t we? Also, lucky the markets are closed to that no one can put the pension on this.