A strategy idea for options trading investors.
Monitoring the price action in the S&P 500 of late has been like watching two oversized sumo wrestlers engaged in an impressive shoving match. Just when you think one wrestler has gained the upper hand, the other fights back viciously. This incessant back and forth is now running on its 15th day with the bulls aggressively defending 1265 and the bears setting up camp at the 1300 level. A resolution of this standoff will help indicate the market’s next move.
In light of yesterdays post highlighting the multi-month weakness in the financial sector (Profit from XLF Financials’ Flop) I decided to drill down to the individual sector components in an attempt to discover which stocks looked most vulnerable. Sitting atop my list was none other than Goldman Sachs (NYSE: GS). In the included weekly chart you can see the financial powerhouse is resting on a pivotal support level at the $130 level. A break of this line in the sand may accelerate Goldman’s downward spiral.
Traders seeking bearish exposure in the financial space may consider the following bearish trade ideas IF Goldman is able to crack support.
A more aggressive trader could purchase put options. Buy to open the GS Aug 135 Puts.
For a more conservative alternative consider the purchase of a put spread. Buy to open the GS Aug 135 Puts and sell to open the GS Aug 125 Puts.
Check an options chain for current prices. Goldman Sachs reports earnings on July 18 so traders should consider exiting the trade beforehand to avoid any adverse gaps.
Source: MachTrader
At the time of this writing Tyler Craig had no positions on GS.
Follow Tyler Craig on Twitter@TylersTrading.
