Synthetic Long Discount Alert: BHP GROUP LTD $BHP trading at a 14.20% 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 $56.06 and has an implied volatility of 35.94% 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 $33.40-$95.93 at expiration. In this scenario, the average linear return for the trade would be 60.60%.

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 long call position is opened at a strike of $55.00, which is already $1.06 in the money. An out-of-the-money put at the same strike is sold to finance the call, resulting in a net credit of $6.90 per share. The final position can be considered as having a discount of $7.96 per share over the underlying price of $56.06 for a 14.20% 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.