Goldman Sachs Suggests Buying Calls/Selling Strangles on DIRECTV (DTV)

Goldman Sachs is out with a research note this morning, where it suggests that traders buy calls on DIRECTV, incorporated DTV ahead of several upcoming management presentations, as well as earnings.

Goldman Sachs Telecom analyst, Jason Armstrong, has an M&A ranking of a “2” on DTV (15%-30% probability of a transaction), as he sees the company as a strategic fit for large-cap telcos.

The analysts noted that owning June calls, which capture earnings, is attractive in their view, trading at a 22% implied vol, which is near decade lows and is a 6 point premium to 4 month realized vol. 12-month vol of 24% is well above shorter-dated vol.

Goldman suggests buying the June $48.00 call for $1.53 and selling the Jan 2012 $40/60 strangle for $1.94.

DIRECTV, incorporated in 2009, is a provider of digital television entertainment in the United States and Latin America. The company operates two direct-to-home operating segments: DIRECTV U.S. and DIRECTV Latin America.