Goldman: Buy Puts On These Shitty Stocks For A Pullback (Spoiler: Tesla’s One Of Them)

The thing is, Goldman is working really hard to try and find some opportunities for you in the options market.

You don’t have to thank them for their efforts. After all, it’s “God’s work.”

Over the past week or two, the bank has identified the top 10 ways you can capitalize on low vol, recommended you implement a stock replacement strategy, and pointed out 15 stocks where the options market is pricing in an increased degree of concern, measured by skew and vol, over the next year. If you’re interested (and why the fuck wouldn’t you be, right?), you can read all about those ideas here:

On Thursday, John Marshall and Katherine Fogertey are back at it (bless their hearts) and do you know what they’ve found for you? I’ll tell you. They’ve found some “stocks with low put prices and limited fundamental support.”

Why should you care? Well obviously because those are opportunities to buy cheap protection on shitty stocks and that’s the kind of thing you want to own if we get a meaningful pullback! Do you see how Goldman is trying to employ a healthy does of benign paternalism here?

Here’s some color from the note, out Thursday evening.

Via Goldman

Inexpensive puts to hedge a pullback

For investors looking to protect their portfolio, we identify those stocks which have attractive puts and limited fundamental downside support based on cash-flow analysis and our analysts’ views.

Key metrics: FCF yield, implied vol, downside to price target

  • Low Free-Cash Flow yield: We show that low FCF yield stocks have less downside support than high FCF stocks yet put prices systematically underprice the downside risk.
  • Our analysts see downside potential: We focus on stocks where our analysts see downside potential to their price target and rate the stocks Sell or Neutral.
  • Implied volatility: We highlight stocks where 3-month implied volatility is below median levels relative to the past year.

We recommend buying 3-month puts for volatility increase

Even after the increase in volatility yesterday, options prices remain low relative to history. We favor buying August puts as they are likely to see an increase in value not just because of a short-term stock price move, but also due to a potential rise in implied volatility. This rise in implied vol could benefit put buyers even if a sell-off was moderate. For stocks without August puts, we favor September.




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