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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 $11.19 and has an implied volatility of 13.11% 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 $5.74-$23.62 at expiration. In this scenario, the average linear return for the trade would be 149.85%.
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 $10.00, which is already $1.19 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 $1.80 per share. The final position can be considered as having a discount of $2.99 per share over the underlying price of $11.19 for a 26.69% 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.