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As China becomes a key focus of the political discourse in 2024’s presidential election, Goldman analysts see owning volatility on stocks with a high China exposure as an attractive hedge for investors, according to their Portfolio Hedging Toolkit report for January.
Goldman identified 30 stocks from its China Sales Exposure basket that have the least expensive puts, given the relatively low implied volume and skew.
“Investors interested in hedging election and US-China trade risks using single stocks can choose to buy three-month puts on these names that have the highest sales exposure to China,” analysts wrote.
These puts would capture the New Hampshire Primary, which is happening today; the FOMC meetings on Jan. 31 and March 20, the Super Tuesday on March 5, and “other election-related catalysts,” with a cost of 2.6% on average.
Analysts added that put buyers could risk losing their premium paid if the shares close above the strike price at expiration.
Below is the list, developed by Goldman’s Global Banking & Markets team. It identifies stocks in the Russell 1000 (NYSEARCA:IWF) with the highest sales exposure to China.
- Amphenol Class A (APH) - Total three-month return: 20%. Three-month volatility implied: 11%, skew: 13%. Cost of three-month 5% OTM put: 1.6%
- Otis Worldwide (OTIS) - Total three-month return: 11.8%. Three-month volatility implied: 14%, skew: 27%. Cost of three-month 5% OTM put: 1.8%
- Apple Inc. (AAPL) - Total three-month return: 9.1%. Three-month volatility implied: 7%, skew: 7%. Cost of three-month 5% OTM put: 1.8%
- DuPont de Nemours (DD) - Total three-month return: -0.2%. Three-month volatility implied: 2%, skew: 34%. Cost of three-month 5% OTM put: 1.8%
- Emerson Electric Co. (EMR) - Total three-month return: 1.9%. Three-month volatility implied: 30%, skew: 24%. Cost of three-month 5% OTM put: 2%
- TE Connectivity Ltd. (TEL) - Total three-month return: 9.1%. Three-month volatility implied: 20%, skew: 12%. Cost of three-month 5% OTM put: 2%
- Avery Dennison (AVY) - Total three-month return: 12.4%. Three-month volatility implied: 6%, skew: 32%. Cost of three-month 5% OTM put: 2%
- Expeditors International (EXPD) - Total three-month return: 9.4%. Three-month volatility implied: 16%, skew: 47%. Cost of three-month 5% OTM put: 2.2%
- Fortive Corp. (FTV) - Total three-month return: 0.4%. Three-month volatility implied: 37%, skew: 12%. Cost of three-month 5% OTM put: 2.2%
- Starbucks (SBUX) - Total three-month return: 0.7%. Three-month volatility implied: 23%, skew: 4%. Cost of three-month 5% OTM put: 2.3%
- Corning Inc. (GLW) - Total three-month return: 11.4%. Three-month volatility implied: 18%, skew: 4%. Cost of three-month 5% OTM put: 2.4%
- Air Products & Chem (APD) - Total three-month return: -7.5%. Three-month volatility implied: 70%, skew: 1%. Cost of three-month 5% OTM put: 2.4%
- A. O. Smith (AOS) - Total three-month return: 19.2%. Three-month volatility implied: 9%, skew: 30%. Cost of three-month 5% OTM put: 2.5%
- Ingersoll Rand Inc. (IR) - Total three-month return: 26.4%. Three-month volatility implied: 43%, skew: 12%. Cost of three-month 5% OTM put: 2.6%
- 3M Company (MMM) - Total three-month return: 23.9%. Three-month volatility implied: 17%, skew: 10%. Cost of three-month 5% OTM put: 2.7%
- TransDigm Group (TDG) - Total three-month return: 35.1%. Three-month volatility implied: 55%, skew: 46%. Cost of three-month 5% OTM put: 2.8%
- Arrow Electronics (ARW) - Total three-month return: 2.1%. Three-month volatility implied: 61%, skew: 12%. Cost of three-month 60% OTM put: 2.8%
- NIKE Class B (NKE) - Total three-month return: -1.6%. Three-month volatility implied: 22%, skew: 4%. Cost of three-month 5% OTM put: 2.8%
- Littelfuse (LFUS) - Total three-month return: 4.1%. Three-month volatility implied: 11%, skew: 24%. Cost of three-month 5% OTM put: 2.8%
- Element Solutions Inc. (ESI) - Total three-month return: 24.5%. Three-month volatility implied: 28%, skew: 46%. Cost of three-month 5% OTM put: 2.9%
- Agilent Technologies (A) - Total three-month return: 21%. Three-month volatility implied: 59%, skew: 8%. Cost of three-month 5% OTM put: 3%
- Mettler-Toledo (MTD) - Total three-month return: 1.5%. Three-month volatility implied: 35%, skew: 9%. Cost of three-month 5% OTM put: 3.1%
- Keysight Tech (KEYS) - Total three-month return: 21.9%. Three-month volatility implied: 79%, skew: 7%. Cost of three-month 5% OTM put: 3.1%
- Celanese (CE) - Total three-month return: 22.4%. Three-month volatility implied: 10%, skew: 20%. Cost of three-month 5% OTM put: 3.1%
- Timken Company (TKR) - Total three-month return: 11.9%. Three-month volatility implied: 18%, skew: 34%. Cost of three-month 5% OTM put: 3.3%
- Air Lease Class A (AL) - Total three-month return: 16.1%. Three-month volatility implied: 38%, skew: 54%. Cost of three-month 5% OTM put: 3.3%
- Cabot (CBT) - Total three-month return: 7.9%. Three-month volatility implied: 26%, skew: 65%. Cost of three-month 5% OTM put: 3.3%
- Lindsay (LNN) - Total three-month return: 21.7%. Three-month volatility implied: 6%, skew: 13%. Cost of three-month 5% OTM put: 3.4%
- Jabil Inc. (JBL) - Total three-month return: -7.9%. Three-month volatility implied: 54%, skew: 51%. Cost of three-month 5% OTM put: 3.5%
- Huntsman (HUN) - Total three-month return: 0.4%. Three-month volatility implied: 24%, skew: 35%. Cost of three-month 5% OTM put: 3.5%
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