Each week Erlanger Research puts out long and short ideas in an email entitled Types Squeeze Update. We focus on long ideas that are Short Squeezes and short ideas that are Long Squeezes.
A Short Squeeze is a stock that is moving higher and the shorts are losing money. A Long Squeeze is a stock that is moving lower and there are not many shorts. Recently, Long Squeezes have been dropping week after week. So a bounce is in order.
Our favorite bounce candidate is Goldman Sachs (GS) as it is a Long Squeeze but it has excessive put action as the Erlanger Option Rank is at 90%. Therefore, this could be a Put Squeeze which happens after a stock has dropped and the put action remains too heavy.
If you like to play options, then you can buy the November $310 Call for $14.01. So the cost of this is $1401 against buying 100 shares for $31000. An even better play would be to buy the November $310 Call for $14.01 and sell the $325 Call for $6.55. The cost drops to $7.46 or $746.