Dear Reader,

Yesterday, we looked at a Daily Price Chart for Republic Services, Inc., noting that RSG’s OBV line is sloping up, validating the stock’s recent trend.

For today’s Trade of the Day we will be looking at a Daily Price chart for Goldman Sachs Group, Inc. stock symbol: GS.

Before breaking down GS’s daily price chart let’s first review which products and services are offered by the company.

The Goldman Sachs Group, Inc., a financial institution, provides a range of financial services for corporations, financial institutions, governments, and individuals worldwide. It operates through Global Banking & Markets, Asset & Wealth Management, and Platform Solutions segments.

Now, let’s begin to break down the Daily Price chart for GS. Below is a Daily Price Chart with the price line displayed by an OHLC bar.

Buy GS Stock

The Daily Price chart above shows that GS stock began reaching a series of higher highs and higher lows since mid-December.

This pattern of bullish trading suggests the stock will march on to a further advance.

You see, after a stock makes a series of two or more higher highs and higher lows, the stock typically continues its price up trend and should be purchased.

Now, since GS is currently making a series of higher highs and higher lows and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a GS call option spread.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $632 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if GS stock is flat or up at all at expiration the spread will realize a 58.2% return (circled). 

And if GS stock decreases 7.5% at option expiration, the option spread would make a 58.2% return (circled). 

Due to option pricing characteristics, this option spread has a ‘built in’ 58.2% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader. 

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

The prices and returns represented below were calculated based on the current stock and option pricing for GS on 4/23/2024 before commissions.

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One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, or Netflix for as little as $350. With an option spread you can control 100 shares of Netflix for $350. If you were to purchase 100 shares of Netflix at current prices it would cost about $58,000. With the stock purchase you are risking $58,000 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

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Wishing You the Best in Investing Success,

Chuck Hughes
Editor, Trade of the Day

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*Trading incurs risk and some people lose money trading.