By Steven M. Sears
Greed and fear are grappling for investors' attention as the 2025 trading year approaches its expiration.
The S&P 500 index is poised this year to sharply surpass its historical annual return of 9%, and yet many investors are afraid of what comes next.
The elevated uncertainty emanates from the market's extraordinary returns, lingering questions about President Donald Trump's tariff diplomacy, and concerns that inflationary pressures and job market weakness merit lower interest rates, which should benefit stocks even as they reinforce fears of an economic slowdown.
One way to embrace the moment is to invest beside the best investors. By any calculation, it is hard to top Goldman Sachs Group.
The mechanics of the thesis are simple.
Buy Goldman stock outright, or control the stock with options, to harness the bank's global expertise in banking, trading, and analysis. Few firms have a better handle on the current scene or a stronger risk-management culture.
Gus Levy, one of Goldman's legendary leaders, once advised his colleagues to be "long-term greedy" -- meaning that they should be focused on profitably navigating the market and managing risk for as long as possible rather than chasing high-risk, potentially high-return opportunities.
It's a worthy goal for all investors.
So far this year, Goldman's stock is up 38%, much more than the S&P 500's 16% return. Our bullish thesis is arguably reflected in its stock price, which means it makes sense to define the risk and potential reward with put and call options.
The goal: to position for the stock to advance into January on the assumption that expected interest-rate cuts -- and the information that will be shared when companies release quarterly earnings -- will allow Goldman's analysts, bankers, strategists, and traders to make better decisions than almost anyone else in the market.
To monetize the view that Goldman consumes information and uses it to make better investment decisions, investors can consider selling January puts -- and buying calls -- on Goldman stock. The intent is to buy the stock at lower prices should a decline occur, while participating in any gains.
With Goldman's stock at $789.65, the January $720 put could be sold for about $22. The put sale positions investors to buy the stock at an effective price of $698 or to keep the premium if the stock is above the strike price at expiration.
The risk is that the stock falls far below the strike price, which could happen if Goldman's third-quarter earnings are poor or the bank warns analysts that future earnings estimates are too high.
To profit from any potential stock upside, investors can simultaneously buy the January $790 call and sell the January $810 call. The spread -- that is, buying one call and selling another with a higher strike price -- positions investors to profit if the stock keeps rallying.
The spread costs about $9.75 and is worth a maximum of $10.25 should the stock be at $810 or higher at expiration. If the stock is below the lower strike price at expiration, the call spread fails.
During the past 52 weeks, Goldman's stock has ranged from $439.38 to $825.25.
The Goldman trade reflects our belief in the wisdom of investing in companies that are dedicated to fostering extraordinary cultures, decision-making, and successfully execution of plans.
This "buy the best" principle has animated our past recommendations to invest in Interactive Brokers Group and KKR. The thesis reflects confidence that the executives at those companies are perpetually analyzing the world around them and their own companies, while optimizing risk-adjusted decisions to perfect the art of being long-term greedy.
Email: editors@barrons.com
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October 08, 2025 01:30 ET (05:30 GMT)
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