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Dear Roy:

I have been reading your series of articles with interest regarding realized gains, e.g. shorting the box, buying a put against a position, etc. all cause a realized gain. Now I have a question on the concept of a "substantially equal security" --- particularly as it realates to arbitrage plays --- let's say that A is buying B on a one-to-one basis; I buy 1000 shares of B and either 1. sell short 1000 shares of A or 2. buy 10 put contracts on A; obviously & fully intending to make money on the spread between A & B at no risk to me other than the potential that the deal between A & B falls apart. Assuming that the deal remains open through a year-end; have I realized a gain buyt selling a substantially equal security???

I personally think the answer is no, because of the continuing risk that A may not buy B until such time as the deal is approved by both sets of shareholders or maybe not until actualization of the sale & exchange of shares; however, I am admittedly unsure.

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