Goldman’s options strategy ahead of Boeing’s gains
According to Goldman Sachs, Boeing is set for a strong earnings report that should boost its shares and reward options traders. In a note to clients on Wednesday, the bank’s derivatives research team, led by Vishal Vivek, selected a call option on Boeing as one of its tactical trading recommendations for the early part of this earnings season. Investors have had to be patient with Boeing in recent years as the aerospace maker was already dealing with the aftermath of two high-profile crashes before the Covid pandemic brought global air travel to a halt. However, Goldman analyst Noah Poponak is confident the company is near a turning point thanks to improving free cash flow, Vivek said in the note. “Given management’s stated commitment to achieve investment grade rating, Noah expects strong FCF to drive rapid deleveraging and notes that FCF inflection point is a key driver of the stock’s upside.” ‘ the note said. Boeing is expected to release its fourth-quarter results on Jan. 25. Goldman recommends the $210 strike calls, which expire on Feb. 23. A call option is a bet that a stock will rise above a specified strike price before the contract expires. The option allows the holder to buy the stock at that strike price, which would represent a discount to the market. One benefit of using call options is that if the bet proves wrong and the stock falls instead, the loss on the trade is simply the price paid to buy the option at the start of the trade. Boeing shares have got off to a good start in 2023, already up around 8%. The stock was trading around $207 a share on Wednesday afternoon. BA YTD Mountain Boeing stock is up around 8% since the start of the new year. Goldman Sachs isn’t the only Wall Street company bullish on Boeing. According to FactSet, 73% of analysts covering the stock have a buy rating or an overweight rating on the aerospace giant. However, the average analyst price target is just over $209 per share. This low average price target could be one reason the options market is still cheap for Boeing, which should increase the returns on a successful options trade. “BA option prices are low ahead of gains. The one-month implied volatility of 40 is only in the 29th percentile compared to last year,” the Goldman note said. – CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2023/01/11/goldmans-options-strategy-ahead-of-boeings-earnings.html Goldman’s options strategy ahead of Boeing’s gains
