A takeover bid is a corporate action in which a company (the acquirer) makes an offer to purchase another company (the target) usually to provide synergy, tax benefits or diversification.
The effect that a takeover will have on an existing position will vary, depending on whether the acquiring company offers cash, stock, or a combination of both for the target company.
Cash takeovers
Your position will be closed out when the cash is received and adjusted for interest, depending on the contract of the trade.
Stock takeovers
Your original position will be closed, and a new position will be opened to reflect the terms of the takeover, based on the previous night's closing price. Any stops or limits will be adjusted accordingly.
Cash and stock takeovers
The original position will be closed, and a new position will be opened to reflect the terms of the takeover based on the previous night's closing price and the cash offer, and adjusted for interest depending on the contract of the bet. Any attached stops or limits will be adjusted.
Please note, this information is intended as a generic example, and subject to change at any point. It will not apply to every scenario.