Quantchabot has detected a promising Bear Call Spread trade opportunity for SOUTHWEST AIRLINES (LUV) for the 21-Oct-2022 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
LUV was recently trading at $34.25 and has an implied volatility of 41.45% for this period. Based on an analysis of the options available for LUV expiring on 21-Oct-2022, there is a 34.20% likelihood that the underlying will close within the analyzed range of $30.44-$34.33 at expiration. In this scenario, the average linear return for the trade would be 22.34%.
52 week low: SOUTHWEST AIRLINES recently reached a new 52-week low at $34.23. LUV had traded in the range $34.36-$56.33 over the past year.
Trade approach: Reaching a new 52-week low is a bearish indicator, so this trade is designed to be profitable if LUV maintains its current direction and does not revert back to pricing on the bullish side of $34.25 on 21-Oct-2022. If possible, the trade has been padded such that slight movement against the trade would still return a profit.
Upside potential: Using this bearish strategy, the trade would be profitable if SOUTHWEST AIRLINES closes at or below $34.33 on 21-Oct-2022. Based on our risk-neutral analysis, there is a 50.05% likelihood of this return.
Downside risk: As with any options trade, there is a substantial downside risk where you may lose most or all of your investment.
To analyze this trade in depth, please visit the Quantcha Options Search Engine.