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Synthetic Long Discount Alert: BP PRUDHOE BAY $BPT trading at a 19.48% 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 $21.10 and has an implied volatility of 13.75% 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 $11.97-$30.25 at expiration. In this scenario, the average linear return for the trade would be 50.76%.

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 $1.10 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 $3.05 per share. The final position can be considered as having a discount of $4.15 per share over the underlying price of $21.10 for a 19.68% 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 6/29/2017 10:15:36 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.