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This Strategy Will Help Limit Downside Risks: Goldman Sachs Pro

The impact from slowing government spending might be felt for quarters to come in the tech sector, said Maria Grant, head of Americas cross-product research team at Goldman Sachs. So how should investors be positioned? She shared her best investment ideas.

“We’re recommending a strategy called "stock replacement,'" Grant told CNBC.

“It’s when you own calls as an alternative to stock positions as we head into year-end on tech.”

“Clearly, the government issue is a focus, but at the same time, many people want to own tech for seasonal strength, which typically occurs in the fourth quarter,” she continued. “So swapping out a stocks in some of these strong performers into call options allows you still to keep the upside exposure, but with limited risk.”

Grant said companies such as Intel, Motorola, IBM, EMC are among candidates for replacing stock with call options.

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Scorecard—What She Said:

  • Grant's Previous Appearance on CNBC (Oct. 1, 2010)

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Disclosures:

Options aren’t suitable for all investors. The purchase of options can result in the loss of an entire investment and the risk of uncovered options can result in substantial losses.

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