Traders are making big bets on the largest takeover attempt in tech history (BRCM, QCOM)

Broadcom is attempting a hostile takeover of Qualcomm for $103 billion, which would make it the biggest tech deal ever.
Qualcomm hasn't been receptive to the proposition and plans to fight it, while Broadcom looks ready for a proxy fight.
Investors are positioning for further share gains for Qualcomm, which can be interpreted as confidence in a deal eventually getting done.

Qualcomm may be willing to do whatever it takes to repel Broadcom's $103 billion hostile takeover, but stock investors remain bullish on a deal getting done.

Despite a 16% spike in Qualcomm shares since initial reports of the proposed deal, traders are still paying the highest premium in more than two years to bet on a further increase, relative to hedges against stock losses.

11 7 17 qualcomm skew

And while the company's stock still sits roughly 10% below the $70 per share offered by Broadcom, that's to be expected at this point. Even though acquisition targets generally spike on the initial news, they tend to trade at a discount to the offer price until a deal is set in stone on both sides and proper regulatory approval is received.

With that in mind, investor positioning can be a valuable indicator when handicapping the likelihood a deal gets completed. While Qualcomm is very much trading in this middle ground now, the unabashed bullishness being signaled by the options market suggests that they're confident in further share gains that would likely accompany a done deal.

It's possible that traders are being encouraged by Broadcom's aggressive approach to the takeover. According to a Bloomberg report, the company is getting ready for a proxy battle and may make its pitch directly to Qualcomm shareholders if their board rejects the offer. Another tactic Broadcom could use is to nominate directors for Qualcomm’s board ahead of the company’s annual general meeting in 2018.

Investor confidence — and an accompanying lack of downside worry — can be seen through another measure, which looks at the portion of Qualcomm shares being shorted. The indicator, known as short interest, is close to its lowest level in more than six months, according to data compiled by IHS Markit.

So while the ultimate outcome is still very much unknown, those looking to get a read on investor expectations would be well-served to watch both metrics outlined above.

qualcomm short interest