The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for AGNC INVESTMENT CORP (AGNC) for the 17-Jan-2020 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
AGNC was recently trading at $19.07 and has an implied volatility of 2.98% for this period. Based on an analysis of the options available for AGNC expiring on 17-Jan-2020, there is a 68.27% likelihood that the underlying will close within the analyzed range of $15.63-$24.92 at expiration. In this scenario, the average linear return for the trade would be 72.17%.
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 $20.00, which is already $0.93 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 $2.95 per share. The final position can be considered as having a discount of $2.02 per share over the underlying price of $19.07 for a 10.59% 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 7/9/2018 9:40:59 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.