Synthetic Long Discount Alert: CARVANA CO $CVNA trading at a 14.31% discount for the 18-Jan-2019 expiration

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

CVNA was recently trading at $21.25 and has an implied volatility of 49.14% for this period. Based on an analysis of the options available for CVNA expiring on 18-Jan-2019, there is a 68.27% likelihood that the underlying will close within the analyzed range of $9.93-$47.45 at expiration. In this scenario, the average linear return for the trade would be 60.57%.

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 $22.00, which is already $0.75 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 $3.80 per share. The final position can be considered as having a discount of $3.05 per share over the underlying price of $21.25 for a 14.35% 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 12/26/2017 10:16:47 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.