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Quantchabot has detected a promising Long Risk Reversal trade opportunity for DISCOVER FINANCIAL (DFS) for the 17-Jul-2020 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
DFS was recently trading at $40.36 and has an implied volatility of 65.31% for this period. Based on an analysis of the options available for DFS expiring on 17-Jul-2020, there is a 34.13% likelihood that the underlying will close within the analyzed range of $39.96-$54.29 at expiration. In this scenario, the average linear return for the trade would be 78.93%.
Big 7.80% Change: After closing the last trading session at $37.44, DISCOVER FINANCIAL opened today at $39.74 and has reached a high of $40.66.
Trade approach: A movement as big as 7.80% is a significantly bullish indicator, so this trade is designed to be profitable if DFS maintains its current direction and does not revert back to pricing on the bearish side of $40.36 on 17-Jul-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 DISCOVER FINANCIAL closes at or above $39.15 on 17-Jul-2020. Based on our risk-neutral analysis, there is a 52.66% 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.