Goldman: It’s Time To Replace Your Stocks

Here’s the thing: it’s time to replace your stocks with calls.



We mentioned this earlier this week in “Mark It Zero!’ Goldman’s Top 10 Options Trades To Capitalize On Low Vol.” Here’s how we put it in introducing a few excerpts from a Goldman note:

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, 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.”

Well, fast forward a week and Goldman is back with another riff on the same theme, this time in a piece called “The Case For Stock Replacement.”

That “case” is simple. To wit:

Single stock vols have reached the lowest level on record (since 1990) – and we see stock replacement strategies as attractive to limit risk but still maintain upside exposure. With single stock implied volatility (in three-month term) down to the lowest level on record, owning calls is more attractive than holding stocks for investors that expect volatility.


Simply “put” (pun fully intended), Goldman does “not believe that buying puts to hedge just because volatility is optically low is an attractive strategy, [but given that] low option prices are an indication that there is growing ‘complacency’ in the options market, [calls] provide equity investors with an opportunity to offensively position their portfolio for the next leg of performance.” Add: “cheaply.”

For those interested in taking Goldman’s advice, they’ll be happy to sell you recommend the following calls:



For whatever that’s worth, there it is.


3 thoughts on “Goldman: It’s Time To Replace Your Stocks

  1. Soooooo, Goldman recommends selling the stock and replacing it with a long call, but they don’t recommend keeping the stock and hedging with a put because….they simply don’t like synthetic calls? They’d prefer people be taxed at short-term rates rather than long-term?
    What don’t I understand, other than everything?

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