Quantcha
0
All posts from Quantcha
Quantcha in Quantcha,

Synthetic Long Discount Alert: BP PRUDHOE BAY $BPT trading at a 13.86% discount for the 15-Dec-2017 expiration

The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for BP PRUDHOE BAY (BPT) for the 15-Dec-2017 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

BPT was recently trading at $20.03 and has an implied volatility of 20.30% for this period. Based on an analysis of the options available for BPT expiring on 15-Dec-2017, there is a 68.27% likelihood that the underlying will close within the analyzed range of $13.15-$28.50 at expiration. In this scenario, the average linear return for the trade would be 43.42%.

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 long call position is opened at a strike of $20.00, which is already $0.03 in the money. An out-of-the-money put at the same strike is sold to finance the call, resulting in a net credit of $2.75 per share. The final position can be considered as having a discount of $2.78 per share over the underlying price of $20.03 for a 13.90% 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 7/13/2017 10:57:00 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.