Weekend Trader Series

Weekend Trader Alert

January 29, 2023

Open Positions Update

  • Please extend the scheduled time-stop date on the Chevron (CVX) March 17, 2023, 170-strike call to Monday, February 13.

The following is this week's recommendation:

Goldman Sachs (GS)

Place a limit order to buy the Goldman Sachs (GS) April 21, 2023 350-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, January 27, this option was offered at $18.85. GS closed at $353.70 on Friday, January 27.

Do not attempt to enter this position after Monday's close.

Please use the following guidelines to manage the position:
  • Exit the position if the option is at a 100% gain from your entry price.
  • If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, February 27, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.

Bank name Goldman Sachs (GS) is curling higher after pulling back to its 200-day EMA, which has been a significant pivot since the 2022 summer. The stock is also back above its 21-day EMA. Large put open interest at the 340-strike has been acting as support as well. Now, GS is sitting above the 350-strike, which could be a pivot level and eventually move into becoming an average true range (ATR) trigger point.

At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GS’ 50-day put/call volume ratio of 1.26 ranks in the 79th percentile of its annual range – rolling over from all-time highs. Previous rollovers from this high have typically been bullish, and a continued unwinding of pessimism could give the shares a boost. 

Now could be a good time to weigh in on the security's next move with options. The stock is seeing attractively priced premiums, per Goldman Sachs stock's Schaeffer's Volatility Index (SVI) of 23%, which sits in the low 5th percentile of its annual range. Furthermore, the security's Schaeffer's Volatility Scorecard (SVS) sits at a relatively high 70 out of 100, meaning GS has exceeded option traders' volatility expectations during the past year.

There’s room for upgrades as well, as 12 of the 27 analysts in coverage carry a “hold” or worse rating on GS. Our recommended April 350-strike call has a leverage ratio of 11.2, and will double on an 9.6% rise in the underlying shares.  

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