Synthetic Long Discount Alert: DIGITAL WORLD ACQUISITION CORP. CLASS A $DWAC trading at a 17.39% discount for the 19-Jan-2024 expiration

Quantchabot has detected a promising Synthetic Long Stock trade opportunity for DIGITAL WORLD ACQUISITION CORP. CLASS A (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 $21.79 and has an implied volatility of 101.93% 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 $7.69-$69.14 at expiration. In this scenario, the average linear return for the trade would be 90.34%.

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 $22.50, which is already $0.71 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 $4.50 per share. The final position can be considered as having a discount of $3.79 per share over the underlying price of $21.79 for a 17.39% 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.