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Report: Goldman Sachs in Danger of Missing 2020 Financial Targets

Report: Goldman Sachs in Danger of Missing 2020 Financial Targets

Goldman Sachs (NYSE:GS) might trim the fiscal goals it set for itself earlier this year due to weaker-than-expected results, according to an article published Monday by Reuters.

Citing “analysts and sources inside the bank,” the article said that the company’s ambitions to pivot its focus toward higher revenue-generating segments have been limited by the coronavirus pandemic. In the company’s Investor Day held in January, it outlined plans to lift its return on equity and reduce expenses.

The strategy sought to ramp up business both in lucrative fields in which it has experience and in relatively new corners of its operations. In the former category are activities such as wealth management, while the latter consists of businesses such as consumer loans.

A person cutting a set of U.S. currency bills.

Image source: Getty Images.

According to the article’s sources, the economic strain caused by the outbreak has severely limited the scope for its sales force to win new business. As seen at other banks and financial services companies active in lending, demand for fresh credit has weakened substantially.

Goldman has not officially commented on the article; instead, a spokesman referred to its previous announcements on its latest business strategy. Reuters’ sources did not speculate to what degree management might scale back the financial targets it set in January, or how the company might modify its strategy.

The speculation comes two days before Goldman is scheduled to release the results of its third quarter of fiscal 2020. These are to be delivered before market open on Wednesday. They will be followed immediately by a conference call to discuss them in greater detail.

On Monday, investors seemed unconcerned by the news. They traded the company’s stock up by nearly 3.2%, which comfortably exceeded the gains of the wider equities market on the day.

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Whale’s Resurfacing Shows Danger Persists in the Options Market

Whale’s Resurfacing Shows Danger Persists in the Options Market

(Bloomberg) — Stock traders assessing the looming presidential election and a stalling economic recovery also need to keep an eye on the options market.

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While the frenetic pace of speculation in derivatives has eased a bit recently, it hasn’t stopped, and a chorus of analysts warns the trading remains capable of exacerbating swings in equities. One proxy for the froth still latent in options, the percentage of overall volume represented by single-stock contracts, remains up 19% from a year ago, according to JPMorgan Chase & Co. Most of it is concentrated in megacap technology and momentum-driven shares.

Meanwhile, a large buyer of tech calls dubbed the Nasdaq whale recently resurfaced, purchasing around $200 million worth of call contracts on tech stocks in a single day. The Nasdaq 100 Index has gained in all but two sessions this month and just notched its best week since July after last month’s sharp drop. It’s up 2.2% as of 11 a.m. in New York on Monday.

The situation is another thing for traders to worry about in whipsawing markets where liquidity remains thin. Trading in options showed itself capable of influencing share movement in August and September, when dealer hedging — demand from people who sell options for the underlying stock — created feedback loops that helped drive the Nasdaq 100 higher. That dynamic can also add fuel to downside moves as well as sellers adjust positions.

“This low liquidity environment lays the groundwork for dealer positioning (i.e., gamma imbalances) that can further exacerbate existing market trends,” wrote JPMorgan analysts including Shawn Quigg in a note Tuesday. “Exceptionally large trades in thin markets, especially in sectors (e.g., technology) or investment styles (e.g., momentum) considered overbought or oversold, increase the potential for exacerbated stock moves as dealers hedge exposure.”



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Are oil dividends in danger? The options market doesn’t think so

Are oil dividends in danger? The options market doesn’t think so

Many investors are speculating that Big Oil dividends could be in danger given how low the price of crude has dropped this year, but in an appearance on CNBC’s “Squawk Box,” Chevron CEO Michael Wirth defended his company’s ability to keep its dividend intact.

“We continue to have a very strong balance sheet so our dividend is secure,” Wirth said Wednesday. “We’ve stress-tested the future scenarios at prices lower than what we’ve seen today and still have plenty of capacity to pay the dividends.”

Despite ongoing speculation, Wirth isn’t alone in his sentiment. The options market also doesn’t foresee a material cut to the stock’s dividend anytime soon.

“We can compare the price of a synthetic equity position, using options, to the actual equity. I was looking at the January 2022 options, and you can back out — using interest rates and the current price of the stock — essentially how much [of a cut] the options market is implying in terms of dividends,” Michael Khouw, chief investment officer at Optimize Advisors, said Wednesday on CNBC’s Fast Money.”

Since options don’t receive dividend payouts, the dividend for the underlying equity at a given expiration can be calculated based on how future contract premiums for an option are priced.

Essentially, if these synthetic positions are discounted compared with an actual equity position, the market is signaling some degree of likelihood that the dividend could be reduced between now and a given expiration. 

“Right now, [Chevron] is paying about $1.29 per quarter, there are five quarters that you would be receiving dividends between now and January 2022 expiration, and the cumulative dividends are probably about a dollar shy of what you would otherwise be getting.

“But is a discount like that material enough to think that the dividend is going to be

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