Goldman Sachs Group, Inc. (NYSE:GS) is recommending investors to buy Apple Inc. (NASDAQ: AAPL) June $450 calls, ahead of Apple’s annual Worldwide Developer Conference (WWDC).
Apple Inc. (NASDAQ: AAPL)’s closely-watched annual Worldwide Developer Conference begins on June 10 in San Francisco.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge funds avoiding distressed china debt, growth in crypto fund launches, and the adapting venture capital industry. Q3 2021 hedge fund letters, Read More
Goldman Sachs Group, Inc. (NYSE:GS) in its options research report expects the annual event to once again be a catalyst to Apple Inc. (NASDAQ: AAPL)’s share price.
Katherine Forgertey and team anticipates announcements to be made at WWDC on refreshes of Apple Inc. (NASDAQ: AAPL)’s existing services such as iCloud and Siri, with a possible preview of its new iOS7 operating system.
Justifying the rationale to take position in the call option, the research team feels the options market has underestimated the positive nature of the annual event in the past.
Corroborating historical data, the research team concludes that during the past 10 years, Apple Inc. (NASDAQ: AAPL)’s shares averaged a +5 percent return from 10 days prior to the annual event to 1 day after. Besides, during the same period, Apple Inc. (NASDAQ: AAPL)’s implied volatility also rose by +7 percent, on an average.
Goldman Sachs Analysts Feel The Volatility Is Low
Goldman Sachs Group, Inc. (NYSE:GS) analysts feel the volatility is lower this year ahead of the event, owing to the recent $100 billion capital allocation plan.
Katherine Forgertey and team feel option investors are overly focused on the impact of last quarter’s $100 billion capital allocation news and hence are missing this potentially important catalyst.
The analysts observe that during the past 10 years, buying the closest out of the money one month listed call two weeks ahead of the annual WWDC and closing the day after was profitable, yielding an average profit of 52 percent (including bid/ask spread).
The research team also cautioned that buying puts ahead of WWDC was never profitable, while straddles was just profitable in two years.
Goldman Sachs Group, Inc. (NYSE:GS) analysts also feel Apple Inc. (NASDAQ: AAPL)’s three month implied volatility screens as the second lowest in their mega cup universe, that comprise liquid stocks with greater than $50 billion in market cap. The team observes that this makes Apple Inc. (NASDAQ: AAPL) the cheapest in the Hardware and Semiconductor option universe.
The research team anticipates that product announcements and updates from Apple Inc. (NASDAQ: AAPL) are still likely to move its shares.
The analysts thus feel taking exposure to the call buying more attractive.