Goldman Sachs Says Buy Protection on These Stocks…Now

The folks at Goldman Sachs are warning that October usually brings higher market volatility–and recommend investors buy “long volatility positions” in companies where event risk has not been priced into the options market, including Bristol-Myers Squibb (BMY), JC Penney (JCP), Ford Motor (F) and Intel (INTC).

Bloomberg News

Goldman Sachs’ John Marshall and Katherine Fogertey explain:

We expect a seasonal pickup in implied and realized volatility as we approach year-end…On average since 1928, October realized volatility has been 19 vs 15 for all other months. In recent years, October volatility has been even higher and even more of a standout driven by volatility spikes in 1997, 2002, and 2008. High year-end volatility is visible in each major index and sector over the past 30 years…

We expect a seasonal pickup in implied and realized volatility as we approach year-end. We surveyed analysts across the department to identify the top events in each sector through year-end. We recommend long volatility positions in sectors and companies where the options market appears to be missing key events this fall including Bristol-Myers Squibb, Dish Network (DISH), Intel, Ford Motor, JC Penney, and Pioneer Natural Resources (PXD). We continue to see strong economics keeping volatility below average; however, we believe it is likely for realized volatility to rise from the extremely low levels observed this summer.

What are those catalysts? For JC Penney it’s an Oct. 8 analyst meeting, where the company will probably discuss how back-to-school season is going and it’s plans for Christmas. For Bristol-Myers Squibb it’s a number of conferences, as well as trial data for Opdivo. Intel has earnings on Oct. 14, as well as an analyst meeting on Nov. 20 to contend with. Ford has an update for its new F-Series truck on Sept. 29.

Shares of JC Penney have gained 0.4% to $10.94 at 1:26 p.m. today, while Ford Motor has risen 0.5% to $16.61, Bristol-Myers Squibb has dropped 0.7% to $50.81 and Intel is off 0.5% to $34.75.