Goldman Says Use S&P 500 Calls to Position for Return to Record
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Goldman Sachs Group Inc. has some advice for investors bruised by this month’s U.S. equity sell-off: use call options to position for a rebound to last month’s record highs.
The S&P 500 is down 4.7% from its July 26 record as the trade war blow-ups and a rally in the bond market stoked concern about slowing global growth. Goldman strategists led by John Marshall and Arun Prakash recommend buying 5% out-of-the money one-month call options on the index to position for an increase in equity prices driven by a modest increase in investment and borrowing. They see a 26% chance of the index rallying 5% over the next month, while options are only pricing in a 7% chance.