Synthetic Long Discount Alert: SUNPOWER $SPWR trading at a 12.16% discount for the 17-Jan-2020 expiration

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

SPWR was recently trading at $7.98 and has an implied volatility of 35.05% for this period. Based on an analysis of the options available for SPWR expiring on 17-Jan-2020, there is a 68.27% likelihood that the underlying will close within the analyzed range of $3.91-$17.45 at expiration. In this scenario, the average linear return for the trade would be 70.59%.

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 $7.00, which is already $0.98 in the money. An out-of-the-money put at the same strike is sold to finance the call, resulting in a net debit of $0.01 per share. The final position can be considered as having a discount of $0.97 per share over the underlying price of $7.98 for a 12.16% 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 6/14/2018 9:38:29 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.