Goldman Sachs Put Provokes Interest

Today’s tickers: GS, ACAS, EWZ, EEM, & ALL

GS – Goldman Sachs – Proving that option trading constantly offers opportunities for investors, today’s trade on actively traded investment banker, Goldman Sachs falls under the “did-you-know?” category. Of course we all know about the SEC’s recent clampdown on the banker and the embarrassing revelations about what Fabulous Fab’s emails to his girlfriend said, yet the share price remains buoyant at $142.54 and has rallied 4.7% in today’s activity. So the outlier trade involving a 2,000 lot spread in the January 2011 contract drew our attention. On the bold face of things the spread appears to be a bearish play just like any other put spread, but the investor plumped for the $50 and $25 strikes to play Goldman’s fortunes. But upon a review of time and sales data it appears that this investor wrote the spread by selling 2,000 puts at the $50 strike for $1.40 in exchange for 2,000 puts priced at $1.00 at the $25 strike. Assuming that Goldman’s shares don’t face a wipeout to the tune of 65% between now and expiration in seven months, this investor gets to keep $1.00 per contract for a total premium of $200,000. We didn’t know that. The elevated reading of options implied volatility – near 83% in the case of the $50 strike put – has clearly set this investor’s mind racing.

ACAS – American Capital Ltd. – Growing fears over a double-dip recession and what impact the strains to liquidity around the world’s credit markets have taken a hefty toll on American Capital. The company puts together employee and management buyouts using debt and equity financing. Arguably the company might suffer more than others if equity prices remain in the doldrums on account of a debt crisis in Europe. The recent recovery in its share price to $6.65 went up in smoke this week with shares slumping on Thursday to $4.37. One investor appears to have taken advantage the drop to place a bullish call spread using 7,500 call options in the November contract. The purchase of intrinsically valued $4.00 strike calls is matched against the sale of an equal amount of $5.00 calls. Resumption to normal business conditions would presumably see shares recover through this leaving the investor with a 55 cents per contract gain having spent a net 45 cents today to place this trade. Option implied volatility dropped a little this…

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