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Earnings Rundown for GS

Earnings are on deck for Lloyd and his boys, let's see what the options are showing.

The stock closed at 174.68 so the ATM straddle is going to be the 175 strike. It traded at 5.66 so the expected move by Friday opex is about 3.2%. So if GS gets above 180.67 or below 169.34 then the option market had underpriced the move-- this can often lead to some nasty squeezes, especially if the earnings gaps significantly above that level.

The past few earnings events have seen negative price reactions, but the volatility sale for the most part was a scratch:

source: www.livevol.com

source: www.livevol.com

I didn't play GS this round (AAPL and IBM had better setups), but my best guess is that vol expectations will be about right, and a strategy like an iron condor or straddle/strangle swap will have worked.

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/