Synthetic Long Discount Alert: BP PRUDHOE BAY $BPT trading at a 10.30% discount for the 15-Mar-2019 expiration

The automated Quantcha Trade Ideas Service has detected a promising Synthetic Long Stock trade opportunity for BP PRUDHOE BAY (BPT) for the 15-Mar-2019 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

BPT was recently trading at $33.55 and has an implied volatility of 17.74% for this period. Based on an analysis of the options available for BPT expiring on 15-Mar-2019, there is a 68.27% likelihood that the underlying will close within the analyzed range of $24.94-$46.66 at expiration. In this scenario, the average linear return for the trade would be 56.65%.

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 $35.00, which is already $1.45 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 $4.95 per share. The final position can be considered as having a discount of $3.50 per share over the underlying price of $33.55 for a 10.43% 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 9/14/2018 12:30:19 PM ET. The analysis does not include brokerage fees or commissions and is not investment advice.