the only two people in above thread who get it are wugin and...

the only two people in above thread who get it are wugin and bommeronrations:

what wu gin is doing exactly the right thing. He is hedging, not speculating. My being short TIM and long TIMPB in a ratio of around 4:1 he wins whatever happens. This is an anomaly that is only available since TIMPB is so cheap to TIM. If TIM goes bust, he makes money on his short CFD but loses a little on his TIMPB. If TIM survives, he gets 4 times his TIMPB in shares in TIM which more than pay for his short covering costs on TIM. You can build a simple spreadsheet that gives a range of outcomes for various share prices.

alphac, not sure why you think I (or indeed wugin) would be underwater. This seems to be a risk free trade. The only reason I have not loaded up in a big way is I worry about Murphy's Law. But wugin is 100% correct in my opinion.