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Quantchabot has detected a promising Short Risk Reversal trade opportunity for DAQO NEW ENERGY (DQ) for the 19-Feb-2021 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
DQ was recently trading at $77.97 and has an implied volatility of 94.87% for this period. Based on an analysis of the options available for DQ expiring on 19-Feb-2021, there is a 34.14% likelihood that the underlying will close within the analyzed range of $57.57-$77.98 at expiration. In this scenario, the average linear return for the trade would be 67.90%.
Big -8.60% Change: After closing the last trading session at $85.30, DAQO NEW ENERGY opened today at $82.52 and has reached a low of $76.65.
Trade approach: A movement as big as -8.60% 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 $77.97 on 19-Feb-2021. 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 $82.50 on 19-Feb-2021. Based on our risk-neutral analysis, there is a 57.37% 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.