Financial stocks continue to show weakness and have failed to take part in the recent move higher in equities. Should the market experience weakness after tomorrow’s job numbers, adding cheap bear put spreads will help to offset our long positions in the portfolio.
Because of the weakness as of late in the financials, they will likely be the first to roll over if the market weakens. Worst case, the market continues higher and we sleep well at night knowing we have some hedges on while still enjoying profits from our long positions in the portfolio.
Technically, Goldman Sachs (GS) has overhead resistance of the 20 and 200-day EMAs. The stock traded as low as $153 two weeks ago and equity downside will likely cause this level to be tested again.
We prefer to buy options here as volatility premium is once again cheap, as witnessed by the $VIX falling below 18 yesterday. We have also provided another portfolio update.
Trade Idea:
BUY +2 VERTICAL GS 100 APR 11 155/150 PUT @.98 LMT
Trade Details:
Type: Bear Put Spread
Expiration Month: April
Breakeven Level(s): $154.02
Maximum Gains: $804
Profit Taking Level: $475
Maximum Loss(es): -$196
Stop Loss: -$130