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Price Forecast:

Bullish Case: Positive market sentiment from the merger with First Busey could drive CFB's stock higher, as historical returns indicate significant upside potential (up to 100% over two years). Strong loan growth in key markets and synergies support this bullish case.

Bearish Case: Regulatory uncertainties and high implied volatility (indicated by spikes in short-term options) could lead to a downturn. The market's current cautious stance reflects concerns about integration risks and potential earnings dilution post-merger.

Potential Outcomes:

1. Price stabilization around $17 (40%).

2. Upside potential to $25 due to merger synergies (30%).

3. Price drop below $15 from regulatory concerns (30%). Implied volatility trends suggest increased caution with a noted bearish bias.

Trading Oracle: Consider initiating a debit spread by buying CFB 17.50C and selling CFB 20C (expiration ~1 month). The expected merger-driven volatility offers a favorable risk/reward ratio. This strategy capitalizes on potential upside while managing downside risk through limited exposure.

October 16, 2024