Synthetic Long Discount Alert: 500.COM LTD $WBAI trading at a 10.06% discount for the 20-Sep-2019 expiration

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Quantchabot has detected a promising Synthetic Long Stock trade opportunity for 500.COM LTD (WBAI) for the 20-Sep-2019 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

WBAI was recently trading at $11.82 and has an implied volatility of 43.30% for this period. Based on an analysis of the options available for WBAI expiring on 20-Sep-2019, there is a 68.27% likelihood that the underlying will close within the analyzed range of $7.25-$19.91 at expiration. In this scenario, the average linear return for the trade would be 49.54%.

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 $12.50, which is already $0.68 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 $1.90 per share. The final position can be considered as having a discount of $1.22 per share over the underlying price of $11.82 for a 10.32% 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 2/15/2019 12:15:27 PM ET. The analysis does not include brokerage fees or commissions and is not investment advice.