Synthetic Long Discount Alert: BHP GROUP LTD $BHP trading at a 10.31% discount for the 19-Jan-2024 expiration

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Quantchabot has detected a promising Synthetic Long Stock trade opportunity for BHP GROUP LTD (BHP) for the 19-Jan-2024 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

BHP was recently trading at $61.32 and has an implied volatility of 34.02% for this period. Based on an analysis of the options available for BHP expiring on 19-Jan-2024, there is a 68.27% likelihood that the underlying will close within the analyzed range of $36.59-$103.86 at expiration. In this scenario, the average linear return for the trade would be 42.11%.

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 $62.50, which is already $1.18 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 $7.50 per share. The final position can be considered as having a discount of $6.32 per share over the underlying price of $61.32 for a 10.31% 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.