GOLDMAN: 7 Hot Trades You Should Make Right Now


Goldman is out with a list of seven key option trades going into earnings season.

Volatility is roaring back as traders look for any signs of a cyclical slowdown. Buying options can buffer out some of that capital risk. 

They’re not all so vanilla, so brush up your trading vocabulary before you dive in. Ever heard of a strangle? It’s different from a straddle and not as dangerous as you think.

Trade 1: Buy Qualcomm, Inc. Options (NASDAQ:QCOM)

Trade 1: Buy Qualcomm options as the technology giant will be a significant supplier in Apple's iPhone 4S at a time the phone giant looks to be making market share gains with the addition of Sprint. Other pros: upbeat earnings expectations, coming analyst day and Windows Phone launch at Nokia.

Source: Goldman Sachs

Trade 2: Sell Safeway Inc. Options (NYSE:SWY)

Trade 2: Sell Safeway options as analysts see little positive information coming out of earnings today. Expectations are low, and seen going lower. Safeway options are implying a plus or minus 6.8% move on earnings today.

Source: Goldman Sachs

Trade 3: Buy Wells Fargo & Co. Calls (NYSE: WFC)

Trade 3: Buy Wells Fargo calls on optimism that the bank is well positioned and may beat core earnings expectations. Goldman sees strong financials as outperforms this quarter.

Source: Goldman Sachs

Trade 4: Buy Morgan Stanley Calls (NYSE: MS)

Trade 4: Buy Morgan Stanley calls on a rally post earnings. Fears should be quelled when the balance sheet is officially out and analysts can see what the bank is holding, and not holding.

Source: Goldman Sachs

Trade 5: Buy Chipotle Mexican Grill, Inc. Calls (NYSE:CMG)

Trade 5: Buy Chipotle calls. Analysts believe +9% same-store sales results will drive a rally in the stock.

Source: Goldman Sachs

Trade 6: Sell Ingersoll-Rand PLC Strangles (Public, NYSE:IR)

Trade 6: Sell Ingersoll-Rand Strangles as volatility from earnings has depressed following the company's pre-announcement. A short strangle involves selling both a slight out-of-the-money put option and slight out-of-the-money call option.

Source: Goldman Sachs

Trade 7: Buy SanDisk Corporation Call Spreads (NASDAQ:SNDK)

Trade 7: Buy SanDisk call spreads on strong expected third quarter earnings and growing seasonal demand.

Source: Goldman Sachs

Equity Strategy: Citi recommends these 20 stocks

If options worry you, and you'd rather be in equities, Citi is also out with a report of key picks.
Click here to see the 20 companies Citi expects will outperform >

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