Level 3 Option Report 

This is our most complete option service. Level 3 adds some of our favorite strategies to the mix and we "custom fit" the opportunity with an option approach. As market conditions change, this service has the flexibility to quickly adapt. The objective is consistency and Level 3 is well suited for larger accounts. Each month you'll receive three new opportunities. 

Issue     08/27/2010 Recent Reports     Past Reports    

Bearish GS
Stock Option Trading Strategy Buy out of the money put options
Stock Option Trade Buy 10 GS Oct $135 puts (GS 10V135.00) @ $5.60 - Day. We are buying October so that we have plenty of time for this trade to work out. filled 08/27/10
Stock Option Target Sell 10 GS oct $135 puts @ $4.40 - Day. Filled 9/1/10
Stock Option Stop None
Stock Description The Goldman Sachs Group, Inc., together with its subsidiaries, provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.
call option trade

Option Trade Rationale In July, the company said its profit tumbled 82% in the latest quarter, as market turbulence and a recent settlement with the Securities and Exchange Commission kept a lid on results.

Overall, it represented one of the worst performances for the firm since the financial crisis erupted, as the company also took a charge related to the British government's tax on Goldman's U.K.-based employees.

The biggest hit was a 40% decline in revenue from trading, hurt by wild market swings May and June.

Other parts of the company's business didn't fare well either. Goldman's traditional investment banking business reported a 36% decline in revenue, as overall stock and debt underwriting activity dried up.

Sales activity declined in Goldman's asset management and securities services business, although to a smaller extent.
Trading Game Plan "The market environment became more difficult during the second quarter and, as a result, client activity across our businesses declined," company chairman and CEO Lloyd Blankfein said in a statement.

Trading volumes have been dismal and this will hurt profits. Many brokerage firms have been downgraded this week for this reason and exchange stocks (NDAQ, CME, ICE) are down. Investment banking will also be down and there are not any IPO's coming to market.

The government has passed the financial reform bill and that will have a negative impact on earnings. Furhtermore, there are still pending lawsuits against GS for fraud eventhough it settled with the government.

the stock is weak relative to the market and it has been in a steady decline the last 3 weeks. A few days ago it broke support at $147 and it is down today when the market is staging a rally. The stock has also been weak relative to the financial sector the last two days and that is a bearish sign. I like buying the October $135 puts ahead of a week filled with economic releases.
Stock Option Track Record 8/27/10 - Bought 10 GS Oct $135 puts (GS 10V135.00) @ $5.50. the options traded between $5.40 and $5.60 during the first 20 minutes and we will use the average prive for our fill.

9/1/10 - Sold 10 GS Oct $135 puts @ $4.40. The market took off when economic news was not terrible. It was not good news, it just was not bad. We had to take our lumps and we lost $1120 (10 x $1.10 plus commissions 2 x $10).