How should traders position themselves (e.g., long/short, options strategy) given the current negative sentiment of -60 and the uncertainty around the transaction?

Trading outlook

The ARIS‑WES deal is now under a formal probe by a former state attorney‑general and a boutique law firm, which has pushed the transaction’s credibility into the “high‑uncertainty” zone. The –60 sentiment score reflects that the market already views the merger as a net downside risk, and the added regulatory scrutiny amplifies the probability that the deal could be delayed, re‑priced, or even aborted. From a fundamentals standpoint, ARIS is a small‑cap water‑treatment business whose valuation is heavily tied to the premium implied by the 0.625 WES‑unit + $25 cash offer. If the investigation uncovers pricing inadequacies, the premium could be stripped away, forcing ARIS shares to trade at a discount to the implied value.

Positioning

• Short‑biased equity play: Keep a modest short exposure on ARIS (e.g., 1–2 % of daily volume) while the market digests the probe. The stock’s price‑action has already shown a widening of the bid‑ask spread and a break below its 20‑day moving average, suggesting a near‑term downside bias. A stop‑loss around 5 % above the current level protects against a sudden “deal‑closed” rally.
  
• Options overlay: For a defined‑risk short, sell (write) out‑of‑the‑money (OTM) call spreads (e.g., 1.5 × ATM strike) or buy OTM puts (e.g., 2–3 % out‑of‑the‑money) with a 30‑day expiry. The put‑buyer payoff captures any sharp drop if the transaction is halted, while the short‑call spread caps upside risk and yields premium in a low‑volatility environment.
  
• Hedged exposure to the acquirer: Because the deal ties ARIS to WES, a correlated long position in WES can offset some of the short‑ARIS risk if the market ultimately treats the probe as a pricing‑adjustment rather than a cancellation. A modest 0.5 × long WES position (or a WES‑linked call) can smooth the net P&L while still keeping the directional bias negative on ARIS.

Key watch‑points

1. Regulatory filings / press releases from KSF or the Louisiana AG in the next 5‑7 business days – any new material finding will likely trigger a 3–5 % move.
   
2. Volume‑price divergence: A sustained increase in sell‑side volume above the 20‑day average volume, coupled with a break of the 10‑day low, confirms the downside trend.
   
3. WES price reaction: If WES remains flat or rallies while ARIS slides, the spread between the two equities widens, reinforcing the short‑ARIS, long‑WES hedge.

Bottom line: With sentiment firmly negative and the transaction’s fate uncertain, a low‑capital‑risk short‑ARIS position—augmented by protective OTM puts or a short‑call spread and a modest long hedge in WES—offers the most efficient way to capture potential downside while limiting exposure to a sudden deal‑closure rally.