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Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

A Strategy Built for Bulls by Steven M. Sears

Summary: Goldman Sachs' (NYSE:GS) portfolio strategist David Kostin thinks Q2 earnings forecasts are low. He likes big-caps due to their greater global exposure and cleaner balance-sheets, which make them less sensitive to interest rate volatility. He says big stocks are at the bottom of 20-year P/E and price-to-book ratios, and notes hedge funds have begun moving into large-caps. Goldman options strategists Maria Grant and John Marshall scanned for big-cap ($40B-plus) companies with especially high volatility premiums. They suggest selling three-month puts on: Target (NYSE:TGT), AT&T (NYSE:T), PepsiCo (NYSE:PEP), Coca-Cola (NYSE:KO), Comcast (NASDAQ:CMCSA), Oracle (NYSE:ORCL), Sears (NYSE:S), IBM (NYSE:IBM), Wells Fargo (NYSE:WFC), Merrill Lynch (MER), Johnson & Johnson (NYSE:JNJ), Morgan Stanley (NYSE:MS), Amgen (NASDAQ:AMGN), General Electric (NYSE:GE), and Disney (NYSE:DIS). At best, the trade pays off with extra cash. At worst, you're left with quality stocks.

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Put option 17 06 2007

Source: Riding the Bull by Writing Puts on Large-Caps - Barron's