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Quantchabot has detected a promising Short Risk Reversal trade opportunity for DAQO NEW ENERGY (DQ) for the 17-Jul-2020 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
DQ was recently trading at $52.42 and has an implied volatility of 70.79% for this period. Based on an analysis of the options available for DQ expiring on 17-Jul-2020, there is a 34.14% likelihood that the underlying will close within the analyzed range of $39.71-$52.43 at expiration. In this scenario, the average linear return for the trade would be 64.47%.
Big -9.32% Change: After closing the last trading session at $57.81, DAQO NEW ENERGY opened today at $56.39 and has reached a low of $52.26.
Trade approach: A movement as big as -9.32% is a significantly bearish indicator, so this trade is designed to be profitable if DQ maintains its current direction and does not revert back to pricing on the bullish side of $52.42 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 bearish strategy, the trade would be profitable if DAQO NEW ENERGY closes at or below $53.15 on 17-Jul-2020. Based on our risk-neutral analysis, there is a 51.95% 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.