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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 $66.53 and has an implied volatility of 33.98% 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 $41.46-$108.80 at expiration. In this scenario, the average linear return for the trade would be 48.52%.
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 $67.50, which is already $0.97 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 $8.50 per share. The final position can be considered as having a discount of $7.53 per share over the underlying price of $66.53 for a 11.32% 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.