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Quantchabot has detected a promising Short Risk Reversal trade opportunity for SM ENERGY (SM) for the 18-Jun-2021 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
SM was recently trading at $16.29 and has an implied volatility of 91.26% for this period. Based on an analysis of the options available for SM expiring on 18-Jun-2021, there is a 34.14% likelihood that the underlying will close within the analyzed range of $11.65-$16.29 at expiration. In this scenario, the average linear return for the trade would be 45.38%.
Big -8.48% Change: After closing the last trading session at $17.80, SM ENERGY opened today at $16.77 and has reached a low of $16.07.
Trade approach: A movement as big as -8.48% is a significantly bearish indicator, so this trade is designed to be profitable if SM maintains its current direction and does not revert back to pricing on the bullish side of $16.29 on 18-Jun-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 SM ENERGY closes at or below $16.90 on 18-Jun-2021. Based on our risk-neutral analysis, there is a 54.34% 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.