Are you looking to trade around Tuesday night’s big event?
Sure you are.
Or maybe you’re not. Maybe you, like me, have prepared for entertainment gold simply by stocking up on popcorn.
But for those interested in some cheaply priced options, Goldman has a few hot tips.
What is priced in for the Presidential Address? Options prices remain near multi-year lows ahead of the President’s speech to the joint session of Congress tonight. SPY straddles only price a 0.9% move through Friday’s close. In Exhibits 1 and 2, we provide an update on what the options market implies for stocks and sectors that have moved on prior comments from the President. We highlight 15 stocks where options are pricing unusually big moves, including BBY, DLTR, PANW, UHS, THC, CYH and MYL.
In our view, there is still discovery value in the options of the stocks with a history of moving on past Presidential comments. Implied volatility on this group of stocks has only increased marginally over the past week in anticipation of the speech, despite a clear increase in the realized volatility of these names. We recommend rolling straddles that are in the money (to higher strikes in most cases). Updating our list based on the latest option pricing, we see straddles as most attractive on Healthcare (XLV, IBB, PFE, UNH) and Consumer (XLP, XLY, DIS, WMT, PNRA, DRI) and Aerospace/Defense (LMT, NOC, BA). See Exhibits 1 & 2. Straddle buyers risk losing their premium paid.