Shares of Goldman Sachs reached a fresh 52-week peak of $247.77 on Friday and could hold the key for the Dow to trip 20,000 this week. The top of an early December, or 6-week trading range, is on the verge of a breakout if the company comes in with a beat-and-raise quarter. A 5% move could have GS pushing $260 or $235 this week. The 50-day moving average is 10% away and could come into play on an earnings miss.
The options for GS are very expensive chips and an earnings trade would be risky with the near-term regular January options expiring on this Friday's close. The GS January 250 calls (GS170120C00250000, $1.90, down $0.75) are a lottery ticket but would double if shares clear $254 on Wednesday's results, or by Friday's close. The GS January 240 puts (GS170120P00240000, $2.40, down $1.10) can be targeted by giddy bearish traders targeting a move below $235. If cleared, the aforementioned put options would also double.
With premiums approaching $4 for both options, a strangle option trade would also be a high-roller bet. The break even points would be at $254 and $236 with a double occurring if shares clear $258, or fall below $232. We will be sitting on the sidelines with GS but we are looking at the Brokerage stocks as possible earnings trades this week.