Quantchabot has detected a promising Synthetic Long Stock trade opportunity for HERCULES CAPITAL INC (HTGC) for the 17-Jan-2025 expiration period. You can analyze the opportunity in depth over at the Quantcha Options Search Engine.
HTGC was recently trading at $16.25 and has an implied volatility of 27.68% for this period. Based on an analysis of the options available for HTGC expiring on 17-Jan-2025, there is a 68.28% likelihood that the underlying will close within the analyzed range of $12.77-$23.76 at expiration. In this scenario, the average linear return for the trade would be 93.47%.
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 $17.00, which is already $0.75 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 $2.75 per share. The final position can be considered as having a discount of $2.00 per share over the underlying price of $16.25 for a 12.28% 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.
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