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Synthetic Long Discount Alert: REDFIN CORPORATION COMMON STOCK $RDFN trading at a 13.41% discount for the 17-Aug-2018 expiration

The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for REDFIN CORPORATION COMMON STOCK (RDFN) for the 17-Aug-2018 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

RDFN was recently trading at $30.95 and has an implied volatility of 28.67% for this period. Based on an analysis of the options available for RDFN expiring on 17-Aug-2018, there is a 68.27% likelihood that the underlying will close within the analyzed range of $18.81-$52.42 at expiration. In this scenario, the average linear return for the trade would be 59.48%.

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 $30.00, which is already $0.95 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 $3.20 per share. The final position can be considered as having a discount of $4.15 per share over the underlying price of $30.95 for a 13.39% 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 1/2/2018 10:16:02 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.