GS Analysis

The Goldman Sachs Group Inc. (GS)

Update 1/9/2017: GS’s implied volatility did indeed fall, although the price traded within a narrow range.The lower IV combined with the working of time decay in my favor produced a tidy profit.

GS shares rose by 0.9% over 31 days, or a +10% annual rate. The options position produced a 110.5% yield on debit for a +1,301% annual rate.


 

GS has relatively high implied volatility after a sharp price rise over the past month and I’m looking for an IV reversion to the mean.

I shall use the JAN series of options, which trades for the last time 42 days hence, on Jan. 20.

Implied volatility ist 31%, which stands in the 32nd percentile of its annual range and the 72nd percentile of the most recent broad move. The price used for analysis was $240.35.

Iron condor, short the $255 calls and long the $260 calls,

short the $225 puts and long the $220 puts,

sold for a credit and expiring Jan. 21.

Probability of expiring out-of-the-money

JAN Strike OTM Δ
Upper 255 75.1% 28
Lower 225 72.9% 24

The premium is $2.00, which is 40% of the width of the position’s wings.

The risk/reward ratio is 1.5:1.

Decision for My Account

I have entered a position on GS as described above. The stock at the time of entry was priced at $240.57.

By Tim Bovee, Portland, Oregon, Dec. 9, 2016

3 thoughts on “GS Analysis

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s