Goldman Sachs's Struggles; Low Risk Option Strategy Could Turn $750 Profit | IBD

TL;DR

Learn how to execute a put calendar spread strategy in Goldman Sachs as a low-risk option play.

Transcript

[Applause] hey option Traders for today's trade we're looking at a neutral option play in Dow Jones stock Goldman Sachs so taking a look on Market Smith Goldman has just found resistance at Key moving averages here at its 10 week and 40 week lines this is a sign that the stock is currently struggling to regain institutional support both moving aver... Read More

Key Insights

• 🐵 Goldman Sachs is facing resistance at key moving averages, indicating a struggle to regain institutional support.
• ⏳ A put calendar spread strategy is a low-risk option play that profits from time decay and increased implied volatility.
• 🙂 Ideal stocks for this strategy have lower implied volatility relative to the market and a neutral to slightly bearish outlook.
• 📅 Executing a put calendar spread in Goldman Sachs involves selecting appropriate expiration dates and strike prices.

Questions & Answers

Q: What is a put calendar spread?

A put calendar spread involves selling a put option with a near-term expiration and buying a put option with a longer-term expiration, both at the same strike price. It profits from time decay and an increase in implied volatility.

Q: How does a put calendar spread work?

By selling a put option with a near-term expiration, you receive a premium. Then, by buying a put option with a longer-term expiration, you capitalize on time decay in the short option. The goal is for the longer-term option to gain value as time passes.

Q: What factors make a stock suitable for a put calendar spread?

Stocks with lower implied volatility relative to the overall market are ideal for this strategy. Additionally, a neutral to slightly bearish assumption is preferable to maximize potential profits.

Q: How is a put calendar spread executed in Goldman Sachs?

Using a trading platform like Thinkorswim, select the ticker symbol "GS" for Goldman Sachs. Choose the appropriate expiration dates and strike prices for the put options, ensuring a net cost for the spread. Consider setting profit targets and stop losses accordingly.

Summary & Key Takeaways

• Goldman Sachs has found resistance at key moving averages, indicating struggles in regaining institutional support.

• A put calendar spread strategy involves selling a put option in a near-term expiration cycle and buying a put in a longer-term expiration cycle on the same underlying stock.

• This low-risk strategy profits from the passage of time and increased volatility, making it ideal for neutral to slightly bearish assumptions.