All posts from Quantcha
Quantcha in Quantcha,

Synthetic Long Discount Alert: BP PRUDHOE BAY $BPT trading at a 18.93% discount for the 16-Mar-2018 expiration

The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for BP PRUDHOE BAY (BPT) for the 16-Mar-2018 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

BPT was recently trading at $20.50 and has an implied volatility of 16.23% for this period. Based on an analysis of the options available for BPT expiring on 16-Mar-2018, there is a 68.27% likelihood that the underlying will close within the analyzed range of $12.14-$29.86 at expiration. In this scenario, the average linear return for the trade would be 56.66%.

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 $0.50 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 $3.40 per share. The final position can be considered as having a discount of $3.90 per share over the underlying price of $20.50 for a 19.02% 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 7/26/2017 9:58:52 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.