Quantcha now offering unlimited commission-free options trading.
Quantchabot has detected a promising Synthetic Long Stock trade opportunity for CHESAPEAKE ENERGY CORP (CHKAQ) for the 21-Jan-2022 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
CHKAQ was recently trading at $7.96 and has an implied volatility of 135.49% for this period. Based on an analysis of the options available for CHKAQ expiring on 21-Jan-2022, there is a 68.27% likelihood that the underlying will close within the analyzed range of $1.54-$41.58 at expiration. In this scenario, the average linear return for the trade would be 155.49%.
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 put position is opened at a strike of $8.00, which is already $0.04 in-the-money. However, its sale more than offsets this moneyness and the cost of the long call that the trade results in a net credit of of $3.11 per share. The final position can be considered as having a discount of $3.06 per share over the underlying price of $7.96 for a 38.53% 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.