Goldman Sachs (GS) 11/17/09 PriceWatch Alert Targets 6.32% Downside Protection

Posted: Tuesday, November 17, 2009 8:42 AM EDT
By: Market Intelligence Center Staff

Goldman Sachs (NYSE: GS) closed yesterday at $177.25. So far the stock has hit a 52-week low of $47.41 and 52-week high of $193.60. Goldman Sachs stock has been showing support around 174.74 and resistance in the 180.64 range. Technical indicators for the stock are Bullish and S&P gives GS a positive 4 STAR (out of 5) buy rating. GS appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 175 covered call (GPY AO) for a net debit in the $166.05 area. That is also the break even stock price for this trade. This covered call has a 60 day duration, provides 6.32% downside protection and a 5.39% assigned return rate for a 32.79% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the GS Jan '11 75 Call (XYF AO) and selling the Jan '10 175 call (GPY AO) for a $92.30 debit. The trade has a 60 day life and would provide 5.61% downside protection and an 8.34% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Goldman Sachs has a current annual dividend yield of 0.78%. [ATU-Seven Summits Research]