Synthetic Long Discount Alert: REDFIN CORPORATION COMMON STOCK $RDFN trading at a 10.68% 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 $27.53 and has an implied volatility of 39.73% 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 $16.88-$46.28 at expiration. In this scenario, the average linear return for the trade would be 51.46%.

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 $30.00, which is already $2.47 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 $5.40 per share. The final position can be considered as having a discount of $2.93 per share over the underlying price of $27.53 for a 10.64% 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 12/27/2017 11:15:45 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.