Options Intelligence Report: Goldman Sachs Group, Inc. (GS) & Quest Diagnostics, Inc. (DGX)

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Long-Term Optimistic Options Trading Persists Despite Goldmanís Current Catastrophe

GS ñ Goldman Sachs Group, Inc.
Skipping over near-term noisy options activity on Goldman Sachs Group, which is no doubt fueled by continued concern regarding the Securities & Exchange Commissionís suit, as well as reports of new investigations by the U.K., possibly by Germany, and the EU, it appears there is long-term optimistic positioning in call options on the firm. Goldmanís shares are currently down 0.90% to $159.26 as of 12:55 pm (ET).

Optimistic individuals engaged in plain-vanilla call spreading in the January 2011 contract to position for an eventual turnaround in Goldmanís fortunes. It looks like roughly 9,000 call contracts were purchased at the January 2011 $180 strike for an average premium of $10.72 apiece, while the same number of calls were shed at the higher January 2011 $210 strike for about $3.51 each. Net premium paid for the call spread amounts to $7.21 per contract.

Call-spreaders are prepared to make money as long as Goldman Sachsí share price exceeds the effective breakeven point at $187.21 ahead of expiration day in January. Maximum available profits of $22.79 are available to traders should the price of the underlying stock jump 31.85% from the current value of $159.26 to surpass $210.00 by January expiration.

 

DGX ñ Quest Diagnostics, Inc.
Call options on the largest clinical laboratory testing business in the United States are active today ahead of the firmís first-quarter earnings report scheduled for release ahead of the opening bell on Wednesday. Quest Diagnosticsí shares are up 2.75% to $59.87, while investor uncertainty, as measured by options implied volatility, is soaring 26% higher to 26.83% as of 12:20 pm (ET).

Bullish players expecting DGX shares to continue to appreciate purchased 2,800 calls at the May $65 strike for an average premium of $0.36 apiece. Call-buyers stand ready to accrue profits in the event that Questís shares surge 9.2% to exceed the average breakeven price of $65.36 ahead of May expiration. Bullish sentiment spread to the June $65 strike where optimistic options players picked up 1,300 calls for an average premium of $0.48 each. Investors long the call contracts make money only if DGX shares trade above $65.48 by expiration day in June.

Positioning in May/June $65 strike call options on DGX today suggests some traders expect that the price per share may reach a new 52-week high in the next couple of months given the current 52-week high of $62.83 on the stock attained back on December 16, 2009.

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