New Positive Convexity Position

New Positive Convexity Position - Bullish GS

This is looking like a good time to try to capture upside in financials as the sector begins to show signs of life after a prolonged slump and implied volatility is cheap across the board.

New Position -Bullish Goldman Sachs

The chart:

Exponential trend analysis projects a +2.97% price appreciation over the next 20 trading days with a projected volatility of 20.36%... the at-the-money call is pricing at 25.1% vol.

Here's the stochastic price simulation:

Finally, the trade.

Short 100 shares at 158.72
Long 6 April 29th 157.5 calls at $5
Long 2 April 29th 160 calls at $3.70
Long 1 April 29th 162.5 call at $2.53

Break even price: $163.49
Convexity 14.83x at 16% price shock
Expected Value: +$1,770
Max Risk: ($3,873)

Here's the payoff chart:

Comments

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