Goldman: It’s Time To Replace Your Stocks

Here’s the thing: it’s time to replace your stocks with calls.

Why? Simple. “THE STOCKS ARE TOO DAMN HIGH AND THE VIX IS TOO DAMN LOW!”

Too

We mentioned this earlier this week in “Mark It Zero!’ Goldman’s Top 10 Options Trades To Capitalize On Low Vol.” Here’s how we put it in introducing a few excerpts from a Goldman note:

So given that SPX 1m implied volatility (8%) is now at the lowest level on record (since 1988) and plunging stock correlations are helping to keep vol suppressed, Goldman figures there might be some opportunities in cheaply priced options ahead of upcoming events or, as they put it, “the down-draft in options prices has created historic opportunities to buy options ahead of catalysts.”

Well, fast forward a week and Goldman is back with another riff on the same theme, this time in a piece called “The Case For Stock Replacement.”

That “case” is simple. To wit:

Simply “put” (pun fully intended), Goldman does “not believe that buying puts to hedge just because volatility is optically low is an attractive strategy, [but given that] low option prices are an indication that there is growing ‘complacency’ in the options market, [calls] provide equity investors with an opportunity to offensively position their portfolio for the next leg of performance.” Add: “cheaply.”

For those interested in taking Goldman’s advice, they’ll be happy to sell you recommend the following calls:

Calls