Synthetic Long Discount Alert: ALLIANCE RESOURCE PARTNER $ARLP trading at a 11.29% discount for the 21-Jan-2022 expiration

Quantcha now offering unlimited commission-free options trading.

Quantchabot has detected a promising Synthetic Long Stock trade opportunity for ALLIANCE RESOURCE PARTNER (ARLP) for the 21-Jan-2022 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

ARLP was recently trading at $8.91 and has an implied volatility of 27.94% for this period. Based on an analysis of the options available for ARLP expiring on 21-Jan-2022, there is a 68.27% likelihood that the underlying will close within the analyzed range of $4.37-$19.53 at expiration. In this scenario, the average linear return for the trade would be 65.50%.

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 $1.09 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 $2.10 per share. The final position can be considered as having a discount of $1.01 per share over the underlying price of $8.91 for a 11.38% 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.