A Goldman options strategy to take advantage of Friday’s jobs report

Options for some big stocks look oddly cheap ahead of a much-anticipated jobs report, according to Goldman Sachs. The February nonfarm payrolls report is due for release Friday morning and will be closely watched by traders after a disastrous January report and persistently high inflation numbers rattled Wall Street’s economic forecast for the year. Goldman’s derivatives research team, led by Vishal Vivek, said in a note to clients on Wednesday that economic events such as jobs reports, consumer price index reports and Federal Reserve decisions have caused large moves for some stocks but the options market in the recent past appears to have undervalued this potential volatility. This is a potential opportunity for investors. “We identify 25 stocks that have averaged a +/- 10% aggregate move across these three catalysts over the past year, but have at-the-money One Month Stradles (OTC) that only cost the upcoming March catalysts 8% on average “, says the statement. Straddles are derivatives that act as a bet on volatility regardless of direction. They are effectively a call option and a put option with the same strike price. While straddle contracts are more expensive than a directional bet, they can pay off if a stock rises or falls significantly, and the risk of the trade is still limited to the premium paid to buy the contract. There are several big tech companies on the list, including Meta Platforms. Shares of the Facebook parent company were on a roll in 2023, already up more than 50%. Two other tech names that outperform are PayPal and Nvidia. The excitement around artificial intelligence has given Nvidia a big boost, whose shares are up about 60% this year on the back of high-performance semiconductors needed for machine learning. Outside of tech, Caesars Entertainment is already up 28% year to date, and analysts see another 30% upside, according to Refinitiv. Another name on the list is Moderna, a typically volatile stock. Shares of Moderna have already moved 3% or more on 11 separate trading days in 2023.

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