Ameritrade Holding Corporation (NASDAQ:AMTD) is a provider of securities brokerage services and technology-based financial services to retail investors and business partners, predominantly through the Internet. The company offers electronic brokerage services, such as touch-tone trading; trading over the Internet; unlimited, streaming, free real-time quotes; extended trading hours; direct access, and commitment on the speed of execution. Since initiating online trading, Ameritrade has substantially increased its number of brokerage accounts, average daily trading volume and total assets in client accounts. The company's customers include independent, value-conscious retail investors, traders, financial planners and institutions.
Shares of AMTD soared last week after the company received an unsolicited buyout offer from one of it's primary competitors; online brokerage E-Trade (NYSE:ET). E-Trade offered Ameritrade shareholders 47.5% of a combined company, plus $1.5 billion in cash, to merge two of the largest players in the online trading marketplace. The new company would serve more than 7 million customers with total client assets of $170 billion, and create a serious competitor to Charles Schwab (NYSE:SCH), the largest online brokerage.
Not surprisingly, Ameritrade rebuffed the offer saying only that it would continue to explore strategic opportunities. But, industry experts believe there is room for some haggling and on Friday, Sandler O'Neill analyst Rich Repetto said E-Trade could afford to pay up to $20.15 a share and still make money on the deal. Regardless of the outcome, the offer has established a value of roughly $13 for AMTD shares in the near-term and traders who favor low-risk speculation plays should consider this position.
Fundamentals Chart Earnings Dates Analyst Ratings
Suggested (Bullish) Option Position:
Sell Put JUN 12.50 TQA-RV
Target Price = $0.40 Open Interest = 3086
Potential Profit (5 contracts @ $0.40) = $200
Initial Margin (5 contracts) = $2,335
Return on Investment (max) = 8.6%
Cost Basis in Stock = $12.10
Days to Expiration = 34