Synthetic Long Discount Alert: NEW RESIDENTIAL INVESTMENT $NRZ trading at a 11.56% discount for the 19-Jan-2024 expiration

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

NRZ was recently trading at $8.65 and has an implied volatility of 44.18% for this period. Based on an analysis of the options available for NRZ expiring on 19-Jan-2024, there is a 68.28% likelihood that the underlying will close within the analyzed range of $5.19-$15.80 at expiration. In this scenario, the average linear return for the trade would be 72.46%.

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 $8.00, which is already $0.65 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 $0.35 per share. The final position can be considered as having a discount of $1.00 per share over the underlying price of $8.65 for a 11.56% 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.