Options Trading Ideas for Week Ending December 15

Analysts at Goldman Sachs expect the S&P500 realized volatility to continue to subside till the end of the year. The macroeconomic model indicated that realized volatility may remain within the 13%-18% range in December, inline with the average levels realized in December over the past 35 years. Goldman Sachs expects the largest dislocations in Financials and Materials, making them attractive option selling candidates for the short term.

The focus trade ideas for December 9 to December 15 are:

The analysts advise sell strangles for Red Hat (NYSE: RHT) as they expect RHT’s earnings to be inline with the consensus. Goldman Sachs believes that RHT will not provide its guidance for 2010 until February, limiting the impact of the event. With elevated implied volatility for RHT as compared to its peers and recent realized, Goldman Sachs said that they would sell strangles to enhance returns.

The analysts have advised buying puts for Electronic Arts (NASDAQ: ERTS) as the upcoming holiday sales and NPD data may prove to be risks to the estimates and act as catalysts for volatility.

Covered calls on CarMax (NYSE: KMX) should be sold. Although recent credit data has been positive, there is near-term upside as there have been no monthly price hikes in used cars in October and prices have remained flat in November, Goldman Sachs said.

According to the analysts, it is time to buy calls on Adobe Systems (NASDAQ: ADBE). The EPS estimates for the coming quarter are higher than the consensus. Goldman Sachs said that ADBE’s comment on new products and headcount reductions may act as catalysts for the company’s EPS.