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Quantchabot has detected a promising Long Risk Reversal trade opportunity for SMILEDIRECTCLUB INC. (SDC) for the 21-Feb-2020 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
SDC was recently trading at $9.64 and has an implied volatility of 86.81% for this period. Based on an analysis of the options available for SDC expiring on 21-Feb-2020, there is a 34.13% likelihood that the underlying will close within the analyzed range of $9.66-$13.28 at expiration. In this scenario, the average linear return for the trade would be 77.39%.
Big 14.98% Change: After closing the last trading session at $8.38, SMILEDIRECTCLUB INC. opened today at $9.08 and has reached a high of $9.70.
Trade approach: A movement as big as 14.98% is a significantly bullish indicator, so this trade is designed to be profitable if SDC maintains its current direction and does not revert back to pricing on the bearish side of $9.64 on 21-Feb-2020. If possible, the trade has been padded such that slight movement against the trade would still return a profit.
Upside potential: Using this bullish strategy, the trade would be profitable if SMILEDIRECTCLUB INC. closes at or above $9.55 on 21-Feb-2020. Based on our risk-neutral analysis, there is a 51.39% likelihood of this return.
Downside risk: As with any options trade, there is a substantial downside risk where you may lose most or all of your investment.
To analyze this trade in depth, please visit the Quantcha Options Search Engine.