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Why do stocks gap up after a buyout is announced?
The price gaps up because the offer is for a price above the current price. Therefore people want to buy now before the price jumps to the offer level. Of course it does depend on the tone of the announcement,  which party is making the announcement, and are they announcing an offer or a deal. If the price is $10, and the offer is for $12; then the price may quickly jump. The early buyers will make the most quick money. They hope that the deal is done quickly, or if not the final price ends up higher.  There are risks. The company could reject the offer. The due diligence could expose a problem. The regulators could reject the deal based on anti-trust issues. The deal could take many months to complete. Or the final deal could be for shares in the new company.  The risks are one reason people sell after the deal/offer is announced. In other cases the seller finally is seeing a profit, or a smaller loss and wants out while they can.