CHICAGO (Reuters) - A number of option investors have been placing protective positions in Goldman Sachs Group Inc GS.N this week heading into the investment bank's quarterly earnings expected later this month.
Goldman shares have gained 8.9 percent over the past 25 sessions, but on the New York Stock Exchange, they were down 81 cents or 0.45 percent to $178.69 in the afternoon session.
“It would not be out of the realm of possibility that Goldman (shares) could be back to the mid-$165 level by May expiration,” said Scott Snyder, options trader at TOS Advisors, a subsidiary of thinkorswim Inc in Chicago.
For the second straight session, traders circled the May $170/$145 put spread which traded 2,500 times this morning for about a total net debit of $3.00. Traders would make money on the trade if shares go below $167 at May expiration.
“My best guess is that they were bought,” Snyder said, referring to Friday’s spread activity. “It could be a protective play against a long stock position or a bearish play on the stock. This could be a jump on earnings.”
Goldman is expected to report quarterly results on April 20. Analysts, on average, expect the investment bank to report a first-quarter profit before items of about $4.02 a share, according to Thomson Reuters I/B/E/S.
In the afternoon session, about 31,000 puts and 41,000 calls traded in Goldman across the U.S. option market, according to option analytics firm Trade Alert.
Even though calls outpaced puts, the number of existing put options held by options investors in the May contract suggested investors have overall become more cautious on Goldman.
As of Thursday’s close, total May put open interest was more than double the amount of May call open positions as a result of the recent spread activity, Reuters data show.
Goldman option activity was brisk on Thursday and weighed in favor of bearish bets. Traders exchanged about 82,000 put options, more than double the average turnover compared with 64,000 call options, also above average, Trade Alert data show.
More than 15,000 May $170/$145 put spreads were bought late on Thursday, said Joe Kunkle, founder of Web information site OptionsHawk.com. “These are very bearish bets for May and signal there is a lot of caution heading into Goldman’s earnings.”
Editing by James Dalgleish
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