2 Stocks Surging on Tax Reform Hopes

Options traders are picking up Goldman calls as bank stocks rally

Managing Editor
Dec 4, 2017 at 2:01 PM
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U.S. stocks are trading mixed, as traders eye a simultaneous tax reform rally and tech dip. Among the names making big moves are bank concern Goldman Sachs Group Inc (NYSE:GS), retail powerhouse Macy's, Inc. (NYSE:M), and shipping company United Parcel Service, Inc. (NYSE:UPS). Here's a quick look at what's moving shares of GS, M, and UPS.

GS Higher With Big Bank Stocks

Goldman Sachs stock is moving higher alongside other big bank stocks today, up 1.8% at $253.36, at last check. The stock earlier peaked at $254.90 -- just cents from its early March record high. The blue chip is sporting a year-over-year gain of 13%, and per CNBC, is also among the best Dow stocks in December, looking back 30 years.

Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows Goldman stock with a 10-day call/put volume ratio of 2.10, ranking in the 92nd percentile of its annual range. This suggests that calls have been bought over puts at a faster-than-usual clip during the past two weeks.

That appetite for GS calls is being echoed today, with roughly 20,000 across the tape so far -- double the number of Goldman puts traded, and 1.5 times the average intraday call volume. The 255 strike is most popular, with notable activity at the weekly 12/8 and December calls. Buyers of these calls expect GS shares to hit record highs in the short term.

Macy's Stock Surges on Tax-Cut Hopes

Macy's stock is moving higher, amid expectations for a lower corporate tax rate. M stock is leading the S&P 500 Index (SPX), up 7% at $25.88, and set for a second close atop its 200-day moving average -- a feat not accomplished in 2017. The stock's fresh gains come as Morningstar noted that department stores have the heaviest U.S. exposure among retailers, and thus top the list of retailers that will benefit from a lower tax rate. Plus, "consumers hopefully will have additional cash, which will help consumer discretionary spending," said Morningstar's Bridget Weishaar.

Short interest on Macy's stock rose 35% during the past two reporting periods, and now represents 23% of its total available float. Meanwhile, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.26 is in the 85th percentile of its annual range, suggesting near-term options traders are more put-heavy than usual. Should M shares extend their recent uptrend, a short squeeze or exodus of options bears could add fuel to the fire.

UPS Gets a Lift From Deutsche Bank Upgrade

United Parcel Service stock is on the rise today, after receiving an upgrade to "buy" from "hold" and a price-target hike to $135 from $125 from Deutsche Bank. UPS was trading up 3.3% at $124.25, at last check, fresh off a new record high of $125.16.

The equity currently sports a SOIR of 0.57, ranking in just the 11th percentile of its annual range. This suggests options traders targeting contracts expiring within three months have rarely been more call-skewed in the past year.

However, ahead of today's upgrade, mosts analysts following UPS stock were skeptical. Of the 17 analysts covering the shares, 15 carry tepid "hold" or worse ratings. Additional upgrades could lift the package delivery shares even higher.
 

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