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Why You Should Short Sirius

Tickers in this article: LMCA P DTV DISCA SIRI

If a deal does not get done by the end of this year, Liberty may decide to take a long-term approach, which could see the short Sirius/long Liberty trade go the other way for investors. If Liberty decides to keep more cash in the company as part of the deal with Sirius, shares of Sirius could run away from Liberty, "raising the absolute level of the 50% of vote and value threshold necessary to complete the RMT split/merge, thereby requiring more, not less, cash to be contributed," Ratcliffe noted.

Shares of Sirius are up 1.3% in early Tuesday trading to $1.96.

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--Written by Chris Ciaccia in New York

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