GS Iron Condor Could See a 33% Return in 3 Weeks

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Goldman Sachs (GS) is due to report earnings after the market close on July 16th. The Barchart Technical Opinion rating is a 88% Buy with a Strongest short term outlook on maintaining the current direction.
GS rates as a Strong Buy according to 9 analysts with 1 Moderate Buy rating and 13 Hold ratings.
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GS Iron Condor Could See a 33% Return in 3 Weeks
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Implied volatility is 66.45% which gives GS an IV Percentile of 71% and an IV Rank of 21.42%.
The Goldman Sachs Group, Inc. is a leading global financial holding company providing IB, securities, investment management and consumer banking services to a diversified client base.
It has 4 broad segments. The IB segment comprises the Financial Advisory, Underwriting and lending to corporate clients.
The Global Markets segment comprises Fixed Income, Currency and Commodities, which include client-execution activities related to making markets in credit products, interest rate products, mortgages, currencies and commodities.
Equities include client execution activities related to making markets in equities, commissions and fees, and its securities services business, warehouse lending & structured financing to institutional clients, advisory and underwriting assignments.
The Consumer & Wealth Management segment includes management and other fees, incentive fees and results from deposit-taking activities related to wealth management business.
The Asset Management division comprises management and other fees.
Goldman Sachs Earnings Iron Condor
Today, we're going to look at an iron condor trade placed over earnings. These types of trades can be high risk, so make sure you understand how they work before attempting something like this.
Ideally, we would like to close it out before earnings.
An iron condor aims to profit from a drop in implied volatility, with the stock staying within an expected range.
When implied volatility is high, the wider the expected range becomes.
The maximum profit for an iron condor is limited to the premium received while the maximum potential loss is also capped. To calculate the maximum loss, take the difference in the strike prices of the long and short options, and subtract the premium received.
Trade Setup
As a reminder, an iron condor is a combination of a bull put spread and a bear call spread.
The idea with the trade is to profit from time decay while expecting that the stock will not move too much in either direction.
First, we take the bull put spread. Using the July 18th expiry, we could sell the $615 put and buy the $610 put. That spread could be sold yesterday for around $0.60.
Then the bear call spread, which could be placed by selling the $725 call and buying the $735 call. This spread could be sold yesterday for around $0.65.
In total, the iron condor will generate around $1.25 per contract or $125 of premium.
The profit zone ranges between $613.75 and $726.25. This can be calculated by taking the short strikes and adding or subtracting the premium received.
As both spreads are $5 wide, the maximum risk in the trade is 5 – 1.25 x 100 = $375.
Therefore, if we take the premium ($125) divided by the maximum risk ($375), this iron condor trade has the potential to return 33.33%.
If price action stabilizes, then iron condors will work well. However, if GS stock makes a bigger than expected move, the trade will suffer losses.
Trades held over earnings allow little room for adjusting, so they can be a bit hit or miss.
Conclusion And Risk Management
This iron condor on Goldman Sachs offers a well-balanced, high-probability setup for options traders seeking steady income with defined risk. By targeting short strikes that sit outside key support and resistance levels, the trade benefits from time decay while maintaining a healthy risk/reward profile.
Remember to close before earnings if you do not want earnings risk.
Please remember that options are risky, and investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com