Goldman Sachs Suggests Hedging Long Stock on Capital One Financial
September 15, 2011 9:44 AM
Goldman Sachs is out with a research note this morning, where it suggests that traders buy 1x2 put spreads on Capital One Financial (NYSE: COF) ahead of several congressional hearings.
GS Credit Cards analyst Ryan Nash sees the potential risk for increased public scrutiny around COF's announcement that they were to acquire ING's US subsidiary for $9bn to grow as we head into public hearings, where we could hear from top opposition to the merger, including Barney Frank, and groups such as the NAACP and NCRC.
The analysts recommend hedging for the following reasons: 1.) Public hearings pose headline risk: Sept 20, Sept 27, and Oct 5 and 2.) COF faces increased hurdles to buying the HSBC assets if ING is blocked.
The analysts suggest buying the Oct $41/37 1x2 put spread for $0.07.
Capital One Financial Corporation is a diversified financial services holding company. The company and its subsidiaries offer a range of financial products and services to consumers, small businesses and commercial clients through branches, the Internet and other distribution channels.
