Synthetic Long Discount Alert: SEARS HOLDINGS $SHLD trading at a 31.67% discount for the 18-Jan-2019 expiration

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

SHLD was recently trading at $6.61 and has an implied volatility of 51.12% for this period. Based on an analysis of the options available for SHLD expiring on 18-Jan-2019, there is a 68.27% likelihood that the underlying will close within the analyzed range of $2.07-$22.00 at expiration. In this scenario, the average linear return for the trade would be 136.01%.

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 $8.00, which is already $1.39 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 $3.49 per share. The final position can be considered as having a discount of $2.10 per share over the underlying price of $6.61 for a 31.77% 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 6/7/2017 9:43:03 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.