18 stocks to buy now, including the top tactical options trades to make ahead of earnings, according to Goldman Sachs
- Market sentiment can be gauged by following options traders' actions and fair-value gaps.
- Goldman Sachs predicts a relief rally for 18 stocks with positive options market sentiment.
Stock traders must be savvy.
If you're trading options, you have to be even savvier since you're factoring in additional variables that are moving targets, including implied volatility and time decay. But if you get it right, you're rewarded with outsize returns.
However, you don't have to trade options to glean insights from the market. You can follow the money, or in this case, the options traders, to gauge whether market sentiment on a stock is bullish or bearish, or whether a huge price move is on the horizon.
For example, a sudden increase in call-option purchases, which gives the buyer the right to purchase a stock at a specific price by a certain date, can indicate expectations that its price will rise. Not only that, but analysts at Goldman Sachs have found that the options market implies average earnings-day moves of 6% in either direction for S&P 500 stocks.
Right now is the peak season for volatility, as traders speculate about a combination of things, including election uncertainty, geopolitical tensions, earnings, and the Federal Open Market Committee's upcoming November meeting.
"This rise in nervousness has increased the potential for relief rallies for stocks on their respective earnings events," Goldman analysts led by John Marshall said in an October 10 note.
They highlighted 18 stocks where their analysts' expected upsides are furthest from the market consensus. In other words, these are their most "differentiated" single-stock ideas for this earnings season. If they're right, buying or holding on to those names through earnings releases would yield gains. And if you don't want to buy the stock, then buying calls may be the way to go.
Below is the list of 18 stocks which includes their options-implied stock move and the strike price for each contract.
1. Gap
Ticker: GAP
Implied stock move (%): 7.6
Option term: December
Strike: 21
Cost %: 9.8
2. Permian Resources
Ticker: PR
Implied stock move (%): 8.4
Option term: November
Strike: 15
Cost % : 31
3. Citigroup Inc.
Ticker: C
Implied stock move (%): 6.2
Option term: October
Strike: 65
Cost % : 2
4. Synchrony Financial
Ticker: SYF
Implied stock move (%): 8.3
Option term: October
Strike: 55
Cost % : 1.2
5. Amgen Inc.
Ticker: AMGN
Implied stock move (%): 7.6
Option term: November
Strike: 330
Cost % : 3.5
6. Boston Scientific
Ticker: BSX
Implied stock move (%): 6.0
Option term: November
Strike: 900
Cost % : 2.4
7. Merck & Co.
Ticker: MRK
Implied stock move (%): 5.0
Option term: November
Strike: 115
Cost % : 1.8
8. Qiagen NV
Ticker: QGEN
Implied stock move (%): 7.7
Option term: November
Strike: 45
Cost % : 4.3
9. AZEK Company
Ticker: AZEK
Implied stock move (%): 4.3
Option term: December
Strike: 45
Cost % : 6.3
10. ADT Inc.
Ticker: ADT
Implied stock move (%): 8.9
Option term: November
Strike: 8
Cost % : 1.4
11. Broadcom Inc.
Ticker: AVGO
Implied stock move (%): 5.1
Option term: December
Strike: 190
Cost % : 7.1
12. Dell Technologies
Ticker: DELL
Implied stock move (%): 7.4
Option term: December
Strike: 130
Cost % : 6.4
13. Klaviyo
Ticker: KVYO
Implied stock move (%): 11.3
Option term: November
Strike: 37.50
Cost % : 5.8
14. Monday.com
Ticker: MNDY
Implied stock move (%): 9.6
Option term: November
Strike: 290
Cost % : 6.0
15. Nvidia Corp.
Ticker: NVDA
Implied stock move (%): 8.0
Option term: December
Strike: 135
Cost % : 8.7
16. Snowflake Inc.
Ticker: SNOW
Implied stock move (%): 9.7
Option term: December
Strike: 120
Cost % : 10.0
17. Toast Inc.
Ticker: TOST
Implied stock move (%): 12.7
Option term: November
Strike: 30.00
Cost % : 6.5
18. Sempra
Ticker: SRE
Implied stock move (%): 4.2
Option term: November
Strike: 85.00
Cost % : 1.3
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