How GS Options Traders Locked In a 100% Profit After Four Days

The stock saw after the Fed failed to move on interest rates

by Emma Duncan

Published on Aug 2, 2018 at 11:24 AM

Subscribers to Schaeffer's Weekly Options Countdown just scored a 100% profit with the Goldman Sachs Group Inc (NYSE:GS) weekly 8/3 242.50-strike put we recommended over the weekend. We're going to take a look back to see why we were initially bearish on the bank stock, and how the options trade unfolded.

At the time of our recommendation last Sunday, July 29, the shares had already shed almost 7% in 2018, underscoring a rough year for the banking giant. While the equity had been working higher since its year-to-date lows last month, it had also recently been rejected by the $240 area -- a former level of support -- and was running into the 20-week moving average.

Looking toward options, we noted that heavy open interest located at the weekly 8/3 237.50- and 240-strike calls would likely reinforce technical resistance in this region. Plus, it was an attractive time for options traders to bet on more losses for Goldman Sachs, since its Schaeffer's Volatility Index (SVI) of 17% was only 2 percentage points from an annual low.

Following our recommendation, Goldman Sachs stock started the week trading near $240, before being swiftly rejected by this level. These losses were exacerbated on Wednesday, after the Fed stood pat on interest rates, and the stock gapped to an intraday low of $232.77 out of the gate today -- allowing us to close the trade and lock in a 100% profit in just four days.

 

Daily Chart of GS with Entry and Exit Dates


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