“Mark It Zero!” Goldman’s Top 10 Options Trades To Capitalize On Low Vol

In case you haven’t noticed, volatility is having a Walter Sobchak moment.

Every time we get a vol spike, that ubiquitous central bank liquidity backstop shouts “OVER THE LINE!

And while you, as a person who is rational and who thinks that geopolitical land mines and gridlock inside the Beltway should be good reasons to say “bullshit, mark it 15 Dude,” that same central bank liquidity backstop (which amounted to $1 trillion in asset purchases in Q1 alone) will politely explain to you that Smokey, this is not the pre-crisis world, there are rules, mark it zero.”

 

So given that SPX 1m implied volatility (8%) is now at the lowest level on record (since 1988) and plunging stock correlations are helping to keep vol suppressed…

Vol

….Goldman figures there might be some opportunities in cheaply priced options ahead of upcoming events or, as they put it, “the down-draft in options prices has created historic opportunities to buy options ahead of catalysts.”

Here’s a quick look at what the bank says are the “10 most attractive option buying opportunities for Analyst Days before June expiry.”

Via Goldman

Buy options for 40 Analyst Days in the next few weeks. May and June are popular months for companies to host Analyst Days / guidance calls, particularly in the Tech and Industrials sectors. We identified 40 Analyst Days that occur before June expiration in our liquid options universe. Based on our analysis of past volatility and current options prices, we think the options market is missing many of these historically important catalysts. We outline the ten most attractive opportunities to buy straddles ahead of May/June analyst days, including WHR, SAP and JNJ. Straddle buyers risk losing the premium paid if shares close at the strike price at expiration.

Options

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