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Quantchabot has detected a promising Long Risk Reversal trade opportunity for PACIFIC ETHANOL INC. COMMON S (PEIX) for the 15-Jan-2021 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
PEIX was recently trading at $6.33 and has an implied volatility of 119.89% for this period. Based on an analysis of the options available for PEIX expiring on 15-Jan-2021, there is a 34.14% likelihood that the underlying will close within the analyzed range of $6.34-$10.15 at expiration. In this scenario, the average linear return for the trade would be 83.69%.
Big 12.72% Change: After closing the last trading session at $5.62, PACIFIC ETHANOL INC. COMMON S opened today at $5.88 and has reached a high of $6.55.
Trade approach: A movement as big as 12.72% is a significantly bullish indicator, so this trade is designed to be profitable if PEIX maintains its current direction and does not revert back to pricing on the bearish side of $6.33 on 15-Jan-2021. 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 PACIFIC ETHANOL INC. COMMON S closes at or above $6.15 on 15-Jan-2021. Based on our risk-neutral analysis, there is a 52.53% 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.