Tuesday, April 27, 2010

"Goldman Bulls Emerge in Options Trades" (GS)

With the hearings underway you are getting as close to real-time reactions as I care to see.
The stock is trading up $1.67 at $153.70.
From MarketBeat (4:29 p.m. MONDAY):

Shares of Goldman Sachs have lost 17% since the SEC announced civil fraud charges against the bank, but a few options traders are willing to bet the stock can recapture a good chunk of those losses in the coming weeks.

Following a steep loss on April 16, the day the SEC announced its charges, shares of Goldman Sachs have come under added pressure as the bank faces lawsuits from shareholders alongside efforts on Capitol Hill to step up regulation of the financial industry.

In options, however, a few traders are showing faith in Goldman’s stock through “butterfly spreads” in Goldman’s near-term options.

One trader, for example, showed up midway through the session Monday to pursue a butterfly in Goldman’s June options, buying June $160 calls and June $180 calls (the “wings” of the butterfly) while selling twice as many June $170 calls (representing the “body” of the butterfly trade).

Priced at $1.50, the overall position makes money if Goldman Sachs rallies above $161.50 before the options expire on June 18. It works best, however, if the stock reaches $170....MORE