Synthetic Long Discount Alert: BP PRUDHOE BAY $BPT trading at a 10.60% discount for the 21-Dec-2018 expiration

The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for BP PRUDHOE BAY (BPT) for the 21-Dec-2018 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

BPT was recently trading at $30.21 and has an implied volatility of 18.36% for this period. Based on an analysis of the options available for BPT expiring on 21-Dec-2018, there is a 68.27% likelihood that the underlying will close within the analyzed range of $22.18-$42.42 at expiration. In this scenario, the average linear return for the trade would be 53.84%.

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 $30.00, which is already $0.21 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 $3.00 per share. The final position can be considered as having a discount of $3.21 per share over the underlying price of $30.21 for a 10.62% 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 7/10/2018 10:56:03 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.