All posts from Quantcha
Quantcha in Quantcha,

Synthetic Long Discount Alert: SEARS HOLDINGS $SHLD trading at a 35.07% discount for the 18-Jan-2019 expiration

The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for SEARS HOLDINGS (SHLD) for the 18-Jan-2019 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

SHLD was recently trading at $9.04 and has an implied volatility of 53.01% for this period. Based on an analysis of the options available for SHLD expiring on 18-Jan-2019, there is a 68.27% likelihood that the underlying will close within the analyzed range of $2.64-$32.28 at expiration. In this scenario, the average linear return for the trade would be 142.21%.

Upside potential: This synthetic long position offers the same potential benefits and liabilities as a long stock position, but at a discount due to the significant premium at-the-money puts are trading at over calls. In this case, the put position is opened at a strike of $10.00, which is already $0.96 in-the-money. However, its sale more than offsets this moneyness and the cost of the long call that the trade results in a net credit of of $4.13 per share. The final position can be considered as having a discount of $3.17 per share over the underlying price of $9.04 for a 35.07% total.

Downside risk: This discount is generally a sign of the stock facing considerable short pressure, and may indicate that the stock has become hard to borrow. However, if you have a long view of the underlying over this period, it could be a good opportunity to benefit from the upside at a major discount.

To analyze this trade in depth, please visit the Quantcha Options Search Engine.

This is an automated post generated based on a market analysis of delayed data at 7/18/2017 9:38:30 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.