Options Traders Buy Calls On Goldman Sachs Before Earnings

GS call options have been unusually popular

Jan 16, 2018 at 3:09 PM
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Not since October 2016 has Goldman Sachs Group Inc (NYSE:GS) finished positive in the session after earnings. Following the last four earnings releases, the shares have one-day losses of 2.6%, 2.6%, 4.7%, and 0.6%. Despite this, options traders have been buying calls ahead of the bank's fourth-quarter earnings unveil tomorrow morning.

Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows GS has a 10-day call/put volume ratio of 2.25. This ratio not only shows call buying has more than doubled put buying in recent weeks, but it ranks in the 94th annual percentile, meaning there's been an unusual interest in long call options recently.

One of the more popular strikes during this time frame has been the January 2018 260-strike call, and this option is now home to peak open interest for Goldman Sachs. While most of the contracts here were bought to open, based on data from the major exchanges, there's also been too much sell-to-open activity to ignore. So, some are betting on the financial giant to surge past $260 by week's end -- when the contracts expire -- while others expect the shares to hold below this level.

Meanwhile, both calls and puts are popular in today's trading, with almost 65,000 total contracts traded thus far, compared to an average daily volume of just 39,000. However, front-month calls account for the six most popular strikes today, with the January 2018 260-strike call leading the way yet again.

It should be pointed out, too, that volatility premium for calls is much steeper than for puts at the moment. This is based on Goldman's 30-day implied volatility skew of 2.9%, ranking just 5 percentage points from an annual low.

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