Synthetic Long Discount Alert: 500.COM LTD $WBAI trading at a 21.52% discount for the 19-Jun-2020 expiration

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Quantchabot has detected a promising Synthetic Long Stock trade opportunity for 500.COM LTD (WBAI) for the 19-Jun-2020 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

WBAI was recently trading at $7.90 and has an implied volatility of 18.72% for this period. Based on an analysis of the options available for WBAI expiring on 19-Jun-2020, there is a 68.27% likelihood that the underlying will close within the analyzed range of $3.95-$16.04 at expiration. In this scenario, the average linear return for the trade would be 111.31%.

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 $7.50, which is already $0.40 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 $1.30 per share. The final position can be considered as having a discount of $1.70 per share over the underlying price of $7.90 for a 21.52% 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.