September 20, 2018

Looking To Strike Gold With Goldman Sachs Group

China is planning to cut the average tariff rates on imports from the majority of its trading partners as soon as next month – including the U.S. – fulfilling a previous pledge as a tariff war bites into trade. Premier Li Keqiang further said his government wouldn’t devalue its currency to boost exports. We “must uphold multilateralism, the rules of free trade… If there are problems, negotiation is needed to solve them.”

*Source:  Seeking Alpha

Let’s consider Goldman Sachs (Ticker: GS):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out four significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on September 19th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN on September 18th.  This indicator measures strength and weakness for a 48-hour period, in this case, strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength. Add to that, all predictive differences are positively sloped.  I want to play the VP continued bullish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For GS, that yields a targeted strike of ~$250.00.  You may want to consider the GS October 19th regular monthly expiration 245/250 call spread, buying it for $1.15.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $1.15 and max reward = $3.85

This means that you are getting odds of 3.35:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance..

If you would like to learn more about the VantagePoint platform and take advantage of the exclusive offer that our clients enjoy, please visit:

https://discover.vantagepointsoftware.com/prosper-demo/

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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