Synthetic Long Discount Alert: REVLON $REV trading at a 16.22% discount for the 21-Aug-2020 expiration

Quantcha now offering unlimited commission-free options trading.

Quantchabot has detected a promising Synthetic Long Stock trade opportunity for REVLON (REV) for the 21-Aug-2020 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

REV was recently trading at $21.34 and has an implied volatility of 29.86% for this period. Based on an analysis of the options available for REV expiring on 21-Aug-2020, there is a 68.27% likelihood that the underlying will close within the analyzed range of $12.61-$36.99 at expiration. In this scenario, the average linear return for the trade would be 70.95%.

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 $22.50, which is already $1.16 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 $4.55 per share. The final position can be considered as having a discount of $3.39 per share over the underlying price of $21.34 for a 15.89% 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.