October 31st, 2014
Published Daily

GS – Goldman Sachs (Last:153.24)

by Rick Ackerman on June 14, 2013 3:21 am GMT

The vertical bull spreads that subscribers hold in this stock are virtually riskless, since they were legged on for a net CREDIT of 0.01.  This means that if Goldman shares were to fall to zero we would have no loss, even after commissions.  Specifically, we hold the July 195-200 call spread 32 times — a position that could produce a gain for us of $16,000 if Goldman is trading above $200 when the options expire on July 19.

What are the chances that this gambit will pay off at maximum odds? The chart shows that Goldman would need to put on a powerful burst of speed to deliver on its potential.  A move to at least 180.67 looks like an odds-on bet a this point, and if the stock were to get there before July we’d be tempted to tell you to cash out of the position for a profit of perhaps $3000-$4000. That’s because GS would probably have to noodle around for a week or two to develop enough thrust for the additional $20 run-up it would take to push our spread in-the-money.  For now, let’s cross our fingers and hope that we are challenged with such a decision.  Think you can’t do this stuff?  Click here and let us show you how. ______ UPDATE (July 8):  The stock is trading about where it was two months ago, making the chance of a payoff extremely remote. However, since our spread was legged on for a small credit, we’ll come away with no loss even after taking commissions into account.

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