Synthetic Long Discount Alert: FRONTIER COMMUNICATIONS $FTR trading at a 14.88% discount for the 18-Jan-2019 expiration

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

FTR was recently trading at $7.69 and has an implied volatility of 43.03% for this period. Based on an analysis of the options available for FTR expiring on 18-Jan-2019, there is a 68.27% likelihood that the underlying will close within the analyzed range of $3.71-$16.61 at expiration. In this scenario, the average linear return for the trade would be 64.10%.

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 $0.31 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 $1.45 per share. The final position can be considered as having a discount of $1.14 per share over the underlying price of $7.69 for a 14.82% 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 2/13/2018 11:24:01 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.