I don't really have much technical analysis support for this trade. This one is basically all fundamental:
GS just reported earnings, and they took a bunch of charges, which made 3Q2023 a lot worse than 3Q2022. They did, however, still beat estimates.
It looks to me like GS is finally getting out of a lot of the headwinds they had over the past couple of years:
Most importantly, today's earnings seem to be met with relief by investors that it wasn't as bad as feared. From a valuation perspective banks have been cheap for a long time, and continue to look cheap to me. And IV is very low by historical comparison. I got long a December out of the money vertical call spread.
GS just reported earnings, and they took a bunch of charges, which made 3Q2023 a lot worse than 3Q2022. They did, however, still beat estimates.
It looks to me like GS is finally getting out of a lot of the headwinds they had over the past couple of years:
- IPO and M&A activity has been very muted over the last several quarters, and we are finally starting to see a decent pipeline emerge.
- The bank is getting ready to jettison its Apple partnership, and its whole consumer-facing Marcus franchise.
- GS significantly cut exposure to commercial real estate, which looks like it will produce losses for years to come.
- The WFH controversy that has caused a lot of dissatisfaction within the ranks seems to have died down.
Most importantly, today's earnings seem to be met with relief by investors that it wasn't as bad as feared. From a valuation perspective banks have been cheap for a long time, and continue to look cheap to me. And IV is very low by historical comparison. I got long a December out of the money vertical call spread.
Comment:
It took a while for this to start to work. But we're there. The Dec 15 320/340 call spread I bought two weeks ago for $5.51 is now worth $10.43. With more than a month to exprration, and the situation being that the long leg is in the money while the short leg is out of the money, time decay is no concern right now. Still, when the market offers 90% return, partial profits are in order.
Trade closed manually:
Today the spread (see above) reached $15.42. That's a 180% return on the price I paid, so I sold. The max value is obviously $20, so I am leaving some money on the table. But there's no guarantee that the spread will ever reach $20, and if it does, it's going to take another 3 weeks. I decided to move on.
On a longer timeline, I am very much still bullish on
GS
, and I do continue to hold the stock in my portfolio.
On a longer timeline, I am very much still bullish on
GS
, and I do continue to hold the stock in my portfolio.
Comment:
Just as a follow-up to yesterday's sale: The call spread has lost about 15% from the price I realized yesterday. It's pointless to peek at what would have been or could have been, but sometimes I can't help myself. I certainly didn't foresee the drop in
GS
today, but I feel good nonetheless.
GS
today, but I feel good nonetheless.