Mike Khouw's Goldman Sachs Trade

CNBC Options Action's Mike Khouw spoke on the show about his expectations for Goldman Sachs Group Inc GS ahead of earnings, scheduled for October 16. There was a lot of bearish activity in the options market, but Khouw noticed that Goldman Sachs had three times average daily call options volume on Friday. One institutional buyer bought around 5,000 contracts of the November 195 call option for $1.35. The break even for this trade is at $196.35 at November expiration. Goldman Sachs moves 3 percent on average on earnings and this time the options market is implying a move of 3.7 percent, explained Khouw. He recommended to follow the institutional buyer because he thinks that the stock is going to break out above its all-time highs. Dan Nathan commented that he wouldn't buy call options in Goldman Sachs, because the stock is broken and there is no chance that it is going to break out.