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Quantchabot has detected a promising Long 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 $19.95 and has an implied volatility of 91.80% 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 $19.95-$26.12 at expiration. In this scenario, the average linear return for the trade would be 64.97%.
Big 8.96% Change: After closing the last trading session at $18.31, SM ENERGY opened today at $18.36 and has reached a high of $20.35.
Trade approach: A movement as big as 8.96% is a significantly bullish indicator, so this trade is designed to be profitable if SM maintains its current direction and does not revert back to pricing on the bearish side of $19.95 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 bullish strategy, the trade would be profitable if SM ENERGY closes at or above $19.75 on 18-Jun-2021. Based on our risk-neutral analysis, there is a 51.51% 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.