Quantcha
0
All posts from Quantcha
Quantcha in Quantcha,

Synthetic Long Discount Alert: RH $RH trading at a 12.54% discount for the 18-Jan-2019 expiration

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

RH was recently trading at $74.09 and has an implied volatility of 31.55% for this period. Based on an analysis of the options available for RH expiring on 18-Jan-2019, there is a 68.27% likelihood that the underlying will close within the analyzed range of $40.34-$141.99 at expiration. In this scenario, the average linear return for the trade would be 55.78%.

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 $75.00, which is already $0.91 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 $10.20 per share. The final position can be considered as having a discount of $9.29 per share over the underlying price of $74.09 for a 12.54% 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 7/24/2017 9:39:56 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.