The value determined could be used to identify a maximum potential "premium price" of 29% to be assigned to therapeutic regimens proposing a single-tablet regimen for HIV-infected patients.
However, the responsible party is exposed to losses should shares slip beneath the effective breakeven price of $34.50, with maximum potential losses of $1.50 per contract if the price of the underlying stock settles below $33.00 at expiration day.
The original transaction yields a breakeven share price of $25.25 and maximum potential profits of $3.25 per contract, while the new trade touts a breakeven price of 25.07 and maximum potential profits of $3.07 per contract.
The revised price range increases the maximum potential proceeds from the sale to $234 million, and implies a total value for the company of up to $2.3 billion.
The trader is exposed to maximum potential losses of $1.36 per contract should the price of the underlying stock plunge 11.6% from the current price to trade beneath $18.00 by expiration day.
The spread yields maximum potential profits of $1.76 per contract should Goodrich Petroleum's share price plummet 15.75% from the current price to $15 ahead of May expiration.
The net cost of the spread amounts to $0.76 per contract, thus positioning the investor to amass maximum potential profits of $5.24 per contract if the XRT's share price plummets 27.45% from the current price to $31 by September expiration day.
Thus, the investor is prepared to accrue maximum potential profits of $13.04 per contract should Mead Johnson's share price surge more than 25% from the current price of $51.83 to surpass $65 by expiration day next January.
In a Dutch auction, a company reveals the maximum amount of shares being sold and sometimes a potential price for those shares.
The net cost of the trade amounts to $1.13 per contract for a total price tag of $2.49 million, and represents the maximum potential losses faced by the investor.
