Synthetic Long Discount Alert: LUCKIN COFFEE INC. AMERICAN DEPOSITARY SHARES $LK trading at a 10.29% discount for the 15-Jan-2021 expiration

Quantcha now offering unlimited commission-free options trading.

Quantchabot has detected a promising Synthetic Long Stock trade opportunity for LUCKIN COFFEE INC. AMERICAN DEPOSITARY SHARES (LK) for the 15-Jan-2021 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

LK was recently trading at $20.04 and has an implied volatility of 62.78% for this period. Based on an analysis of the options available for LK expiring on 15-Jan-2021, there is a 68.27% likelihood that the underlying will close within the analyzed range of $7.59-$55.97 at expiration. In this scenario, the average linear return for the trade would be 56.62%.

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 $20.00, which is already $0.04 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 $2.00 per share. The final position can be considered as having a discount of $2.04 per share over the underlying price of $20.04 for a 10.18% 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 8/28/2019 1:01:51 PM ET. The analysis does not include brokerage fees or commissions and is not investment advice.