Magnet Trade in GS

[Steven Place]

After dropping down to retest its 200 day moving average, GS has completed a 3-week base that includes earnings. It’s now above all its major moving averages and will most likely go and retest 52 week highs.

 

Zooming into a 30 min chart, you will see the logical place for our stops:

The earnings low is where the stock shouldn’t break if the bullish thesis is to remain in tact.

There’s a few different ways you can play this. Here are my favorites:

For the super conservative trader, I would look at the Dec 160/170 bull call spread. This reduces a ton of theta risk and it has a logical short option placement right at the highs.

If you want to be more aggressive (like me), then look to buy the Dec 165 call. With a stop under 155.80 that places your risk at -157 per contract. Use a scaling approach, where you buy 1/2 size here at 3.05 then add half at 2.75.

 

[Steven Place]

GS is now trading at 169.70.

This is a point where I will scale out of the trade as we are heading into key resistance.

The Dec 165 call is now trading at 6 bucks, so it’s almost a double on max risk, and a 2R trade. In hindsight, going a little further out in time (to January Calls) may have been a better choice as it reduces theta risk.

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