Synthetic Long Discount Alert: ARLINGTON ASSET INVESTMNT $AI trading at a 10.93% discount for the 17-Jan-2020 expiration

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

AI was recently trading at $6.91 and has an implied volatility of 14.22% for this period. Based on an analysis of the options available for AI expiring on 17-Jan-2020, there is a 68.27% likelihood that the underlying will close within the analyzed range of $5.23-$9.38 at expiration. In this scenario, the average linear return for the trade would be 63.09%.

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 $7.50, which is already $0.59 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 $1.35 per share. The final position can be considered as having a discount of $0.76 per share over the underlying price of $6.91 for a 11.00% 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 6/18/2019 11:10:48 AM ET. The analysis does not include brokerage fees or commissions and is not investment advice.