Synthetic Long Discount Alert: NIO INC $NIO trading at a 21.04% discount for the 17-Jan-2020 expiration

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Quantchabot has detected a promising Synthetic Long Stock trade opportunity for NIO INC (NIO) for the 17-Jan-2020 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

NIO was recently trading at $10.19 and has an implied volatility of 40.68% for this period. Based on an analysis of the options available for NIO expiring on 17-Jan-2020, there is a 68.27% likelihood that the underlying will close within the analyzed range of $5.03-$21.65 at expiration. In this scenario, the average linear return for the trade would be 89.53%.

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 $10.00, which is already $0.19 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 $1.95 per share. The final position can be considered as having a discount of $2.14 per share over the underlying price of $10.19 for a 21.00% 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 3/5/2019 10:43:15 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.