Joined Nov 11, 2007
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Goldman: Options Markets Spell No Fear

“$GS is doing a bit of what they call “volatility reconnaissance.”

Krag Gregory and his team of quants say that signals from the options market suggest that traders and investors are looking for a favorable outcome from central bank meetings this week, with the Federal Reserve set to make a policy statement on Wednesday followed by the European Central Bank on Thursday.
Gregory says that “if the options market was truly worried about a risk off event we would expect to see hedgers buying put options moving into this week’s news releases.” (Buying a put reflects a bet that the S&P 500 will fall, or at least a hedge against such an occurrence.) However, participants in the options market are buying more calls instead, reflecting bets that the S&P 500 will rise in the near term.
Gregory writes in a note to clients:”

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