Synthetic Long Discount Alert: FRONTIER COMMUNICATIONS $FTR trading at a 13.48% discount for the 17-Jan-2020 expiration

The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for FRONTIER COMMUNICATIONS (FTR) for the 17-Jan-2020 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

FTR was recently trading at $8.50 and has an implied volatility of 36.05% for this period. Based on an analysis of the options available for FTR expiring on 17-Jan-2020, there is a 68.27% likelihood that the underlying will close within the analyzed range of $3.38-$22.76 at expiration. In this scenario, the average linear return for the trade would be 71.30%.

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 long call position is opened at a strike of $8.00, which is already $0.49 in the money. An out-of-the-money put at the same strike is sold to finance the call, resulting in a net credit of $0.65 per share. The final position can be considered as having a discount of $1.15 per share over the underlying price of $8.50 for a 13.48% 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 2/15/2018 10:21:56 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.