Quantchabot has detected a promising Bear Call Spread trade opportunity for AMERICAN ELECTRIC POWER (AEP) for the 20-Oct-2023 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
AEP was recently trading at $75.66 and has an implied volatility of 19.46% for this period. Based on an analysis of the options available for AEP expiring on 20-Oct-2023, there is a 34.19% likelihood that the underlying will close within the analyzed range of $71.13-$76.20 at expiration. In this scenario, the average linear return for the trade would be 37.86%.
52 week low: AMERICAN ELECTRIC POWER recently reached a new 52-week low at $75.47. AEP had traded in the range $77.01-$105.60 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 AEP maintains its current direction and does not revert back to pricing on the bullish side of $75.66 on 20-Oct-2023. 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 AMERICAN ELECTRIC POWER closes at or below $76.25 on 20-Oct-2023. Based on our risk-neutral analysis, there is a 50.41% 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.