Synthetic Long Discount Alert: DIGITAL WORLD ACQUISITION CORP. CLASS A COMMON STO $DWAC trading at a 37.82% discount for the 19-Jan-2024 expiration

Quantcha now offering unlimited commission-free options trading.

Quantchabot has detected a promising Synthetic Long Stock trade opportunity for DIGITAL WORLD ACQUISITION CORP. CLASS A COMMON STO (DWAC) for the 19-Jan-2024 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.

DWAC was recently trading at $47.45 and has an implied volatility of 102.05% for this period. Based on an analysis of the options available for DWAC expiring on 19-Jan-2024, there is a 68.28% likelihood that the underlying will close within the analyzed range of $12.95-$187.39 at expiration. In this scenario, the average linear return for the trade would be 159.61%.

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 $45.00, which is already $2.45 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 $15.50 per share. The final position can be considered as having a discount of $17.95 per share over the underlying price of $47.45 for a 37.82% 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.