Goldman Sachs Encourages Options Trading Ahead of Wells Fargo Earnings Report
- Goldman Sachs designates Wells Fargo as a promising options trading opportunity ahead of its upcoming quarterly earnings report.
- The suggestion to buy calls indicates a bullish outlook on Wells Fargo's stock performance.
- This may influence investor sentiment as expectations build for the bank's financial results.
Investors are being advised to explore the options market for potential gains from Wells Fargo's anticipated rebound, according to a recent note from Goldman Sachs' derivatives research team. John Marshall, head of the team, highlighted the bank's upcoming earnings report as a pivotal moment for the stock, with analyst Richard Ramsden expressing optimism about Wells Fargo's performance for the remainder of 2024. Ramsden's positive outlook is based on expectations of increased net interest income (NII) and growth in loans and deposits. Wells Fargo is scheduled to announce its latest earnings before the market opens on Friday. Marshall specifically recommended call options with a $61 strike price, set to expire later this month. These options allow investors to purchase the stock at a predetermined price, betting on a rise above that level. However, there is inherent risk, as the stock must exceed the strike price by expiration for the trade to be profitable. Despite being a long-term underperformer in the banking sector and still facing regulatory restrictions from a previous scandal, Wells Fargo's stock has surged over 20% this year. Goldman Sachs believes that the bank's fundamentals may exceed current expectations, particularly if the Federal Reserve lifts the asset cap restrictions. Ramsden anticipates a less severe decline in NII than previously guided, bolstered by expected growth in deposits and loans in the latter half of 2024.