Goldman Has 5 Options Trades And 1 ‘Unusual’ Dynamic They Want To Tell You About

Regular readers are familiar with Goldman’s Katherine Fogertey and John Marshall.

Katherine and John – God bless ’em – are big believers in the whole Goldman doing “God’s work” thing.

At least if by “God’s work” you mean scouring the market for possibly compelling option trades that they are definitely not taking the other side of (if you’re a Heisenberg newcomer, you have to parse everything we say for thinly-veiled sarcasm).

The last time we checked in with Katherine and John they had identified “25 differentiated ideas ahead of earnings.” Here’s what we had to say about that:

25! That’s 5 more than 20. And 7 more than 18. And if they had 4 times that number of ideas, they’d have 100.

Well on Thursday, the dynamic delta duo is back and I’m just going to cut right to the chase. Here are their new recos:

  1. Buy DIS straddles for Aug-8 earnings Our analyst sees higher uncertainty this quarter owing to a slowdown in Cable as well as a disappointing box office. Option investors are positioning for earnings to be a positive catalyst for shares (via skew).
  2. Buy Agilent calls for Aug-15 earnings upside Agilent one month implied vol of 22% is at its average level over the past year despite capturing earnings; shares have underperformed the S&P500 by 2% over the past two weeks, creating potential for relief rally on results.
  3. Buy DE calls for Aug-18 earnings beat Our analyst is bullish on the stock ahead of earnings this quarter, and expects management to beat consensus EPS estimates by 9%.
  4. Buy CREE puts to hedge Aug-22 earnings risks We see the potential for the company to miss earnings and believe the market (and options market) is overestimating the potential for M&A on Sell rated shares.
  5. Buy YPF straddles for upcoming catalysts Beyond upcoming earnings, we see potential for heightened volatility around the early October fuel assessment and mid-term elections on October 22.

So if you haven’t already retired by either monetizing your GBP/CZK short or traveling back in time with Dani Burger to make 850,000% on her proprietary “cat factor“, then there’s still hope for you to make some money.

Oh, and this (also from Katherine and John) is worth noting to the extent you think it’s actually “unusual”:

With half of the options universe yet to report earnings, we note that so far this quarter, buying calls on stocks that have traded down ahead of earnings has done unusually well.

Buying calls on stocks that had underperformed ahead of earnings once again shines. So far this quarter, 258 stocks with liquid options have reported earnings (27% of the universe). While stocks broadly realized low earnings moves this quarter on earnings, contributing to below average return for buying calls (-4.5%), puts (+2.3%) and strangles (- 3.3%) ahead of earnings, buying calls ahead of earnings on stocks that underperformed the S&P 500 before earnings has outperformed so far in this earnings season.

Calls

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2 thoughts on “Goldman Has 5 Options Trades And 1 ‘Unusual’ Dynamic They Want To Tell You About

  1. A man went to the doctor with a strange complaint.
    “Well it’s like this Doc, when I drive to work in the morning through the country lanes I start to sing ‘The green green grass of home’. If I see a cat then it’s ‘What’s new, pussy cat?’. It’s so embarrassing, even when I’m asleep and dreaming, I still keep singing. Last night, it was ‘Delilah’, and my wife was not amused!”

    “Yes, it would appear that you have the early symptoms of Tom Jones syndrome.”

    “Well I’ve never heard of that, is it common?” asked the man.

    “It’s not unusual,” replied the doctor.

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