Synthetic Long Discount Alert: ANNALY CAPITAL $NLY trading at a 10.03% discount for the 15-Jan-2021 expiration

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Quantchabot has detected a promising Synthetic Long Stock trade opportunity for ANNALY CAPITAL (NLY) for the 15-Jan-2021 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

NLY was recently trading at $9.03 and has an implied volatility of 8.42% for this period. Based on an analysis of the options available for NLY expiring on 15-Jan-2021, there is a 68.27% likelihood that the underlying will close within the analyzed range of $7.09-$12.40 at expiration. In this scenario, the average linear return for the trade would be 73.42%.

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 $10.00, which is already $0.98 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 $1.88 per share. The final position can be considered as having a discount of $0.91 per share over the underlying price of $9.03 for a 10.03% 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 6/11/2019 11:13:05 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.