Synthetic Long Discount Alert: MEREDITH $MDP trading at a 11.90% discount for the 19-Jan-2018 expiration

The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for MEREDITH (MDP) for the 19-Jan-2018 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

MDP was recently trading at $69.85 and has an implied volatility of 5.20% for this period. Based on an analysis of the options available for MDP expiring on 19-Jan-2018, there is a 68.27% likelihood that the underlying will close within the analyzed range of $60.34-$79.32 at expiration. In this scenario, the average linear return for the trade would be 58.05%.

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 $70.00, which is already $0.15 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 $8.90 per share. The final position can be considered as having a discount of $8.75 per share over the underlying price of $69.85 for a 12.53% 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 11/27/2017 10:06:21 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.