Attractively Priced Bank Stock for Options Bulls

A round of upgrades could provide tailwinds as well

Jan 31, 2023 at 10:52 AM

Bank name Goldman Sachs (NYSE: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 call option has a leverage ratio of 11.2, and will double on an 9.6% rise in the underlying shares.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this GS commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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