weekly options watch; trade ideas; jwn, nvda, csco, gww

1

November 5, 2013

United States

Weekly Options Watch Options Research

Trade Ideas: JWN, NVDA, CSCO, GWW

Trade Recommendations: CSCO, DNR, EXP, GE, GWW, HFC, JWN, MCD, NVDA, RVBD, SAP, UAL (2) One page of WOW (3) Options Insight: 3Q earnings so far; no doubt about it, BUY CALLS (4-6)

Detailed Trade Ideas: JWN, NVDA, CSCO, GWW, Upcoming Analyst Days (6-9) Weekly Options Watch Chartbook – Published today alongside the Weekly Options Watch, contains correlation,

skew, term structure and sector-wide volatility screens for our WOW Coverage Universe.

Options Insight: Stocks are pre-trading positive earnings, flat on earnings day

We analyzed the stock and option price moves for all stocks that have

reported 3Q to date. Long stock trades in the five days ahead of each

earnings event returned an average of +1.2%, but stocks were flat on

average on their earnings events. This has been the most profitable quarter

in four years for our favorite trade of owning calls from 5 days before

earnings to 1 day after (+34% average returns, mid-market). We identify

opportunities for investors to position with options ahead of earnings on

recent underperformers including NVDA, P, WDAY, PANW and MCP.

Trade Recommendations: JWN, NVDA, CSCO, GWW, Analyst Days

Trade 1: Position for additional volatility on JWN earnings on 14-Nov.

Sluggish apparel datapoints ahead of the holiday season raise the potential

for a volatile earnings report.

Trade 2: Buy NVDA calls for earnings on 7-Nov as our analyst sees short-

term upside potential on a solid 3Q and in-line 4Q guidance.

Trade 3: Buy CSCO calls ahead of product launch and earnings. Our

analyst sees upside potential on their 13-Nov earnings event.

Trade 4: GWW option prices are low for 13-Nov analyst day, despite the

fact that shares move +/-2% on prior events. Position with calls.

Trade 5: Analyst day call buying opportunities. Our studies show November

as the most active month in terms of company analyst days. We highlight the

top opportunities for investors over the next month; SAP, UAL and RVBD.

Trade Close: We close our recommendations in XRX at a gain, and the

CSCO put at a loss. Between publications, EXP and TGT were closed at

gains, while KR was closed at a loss.

John Marshall

(212) 902-6848 [email protected] Goldman, Sachs & Co.

Katherine Fogertey

(212) 902-6473 [email protected] Goldman, Sachs & Co.

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. This report is intended for distribution to GS institutional clients only.

The Goldman Sachs Group, Inc. Global Investment Research

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Trade recommendations summary

We recommend adding 12 trades, holding 8 trades and closing 2 trades this week. 3 trades

were closed between publications. The table below focuses on the catalyst-based

recommendations discussed in the WOW; for our macro and thematic recommendations,

we refer readers to our other cross-product reports on GS360.

Exhibit 1: Trade recommendations summary Recommendations and indicative prices as of November 6, 2013 close.

Source: Goldman Sachs Global Investment Research, Bloomberg. Note: A negative value indicates that investors collect premium to put on the trade.

Stock Trade Description Initiation date Stock Trade Stock Trade

Add to these trade recommendations

CSCO BUY Nov-13 $23 CALL 7-Nov-13 22.65 0.59 23.07 0.72

DNR BUY Nov-13 $19 CALL 30-Oct-13 19.35 0.80 19.13 0.65

EXP BUY Dec-13 $77.5 CALL 11-Sep-13 75.01 2.55 78.06 3.90

GE BUY Nov-13 $26 CALL 30-Oct-13 26.21 0.52 26.42 0.59

GWW BUY Nov-13 $270 CALL 7-Nov-13 268.96 2.65 268.96 2.65

HFC BUY Jan-14 $46 CALL 23-Oct-13 45.48 2.40 46.43 2.55

JWN BUY Nov-13 $60 STRADDLE 7-Nov-13 60.34 2.30 60.34 2.30

MCD BUY Nov-13 $95 CALL 30-Oct-13 96.05 1.67 97.41 2.57

NVDA BUY Nov-13 $15 CALL 7-Nov-13 14.80 0.34 14.80 0.34

RVBD BUY Dec-13 $16 CALL 7-Nov-13 15.33 0.63 15.33 0.63

SAP BUY Dec-13 $80 CALL 7-Nov-13 77.78 1.15 77.78 1.15

UAL BUY Dec-13 $36 CALL 7-Nov-13 35.53 1.67 35.52 1.67

Continue to hold these trade recommendations

CCL BUY Jan-14 $38 CALL 21-Aug-13 36.16 1.20 35.39 0.45

EOG BUY Nov-13 $185 CALL 23-Oct-13 185.15 6.10 179.73 3.20

GRPN BUY Nov-13 $9 CALL 30-Oct-13 9.44 1.05 10.28 1.67

HAL BUY Nov-13 $55 CALL 30-Oct-13 53.25 0.43 53.13 0.33

MJN BUY Nov-13 $85 CALL 30-Oct-13 82.80 0.75 82.07 0.66

MNST BUY Dec-13 $65 CALL 31-Jul-13 60.27 3.70 57.52 0.75

MON BUY Nov-13 $110 CALL 30-Oct-13 106.62 0.93 103.22 0.15

S BUY Nov-13 $6 PUT 16-Oct-13 6.03 0.25 7.19 0.01

Close these trades

XRX BUY Nov-13 $10 CALL 30-Oct-13 9.81 0.13 10.28 0.37

CSCO BUY Nov-13 $23 PUT 23-Oct-13 22.65 0.94 23.07 0.63

Previously closed trades

EXP BUY Jan-14 $72.5 CALL 12-Sep-13 69.51 4.80 75.01 6.00

KR BUY Nov-13 $43 CALL 23-Oct-13 42.71 0.65 42.91 0.50

TGT BUY 1-Nov Weekly $64 CALL 15-Oct-13 63.67 0.86 65.90 1.93

Full trade idea references with risks: Legend:

EXP trade close (31-Oct)

https://360.gs.com/gs/portal/?st=1&action=action.binary&d=15915190&fn=/document.pdf

KR, TGT trade close (31-Oct)


DNR, GE, GRPN, HAL, MCD, MJN, MON, XRX trade ideas (30-Oct)


CSCO, EOG, HFC, KR trade ideas (23-Oct)


S trade idea (16-Oct)


TGT trade idea (15-Oct)


EXP trade idea (11-Sep)


CCL trade ideas (21-Aug)


MNST trade idea (31-Jul)

https://360.gs.com/gir/portal//?st=1&action=action.binary&d=15382295&fn=/document.pdf

Continue to hold these trade recommendations: These are open trade ideas where we think the risk/reward on the trade is still favorable; we recommend that investors who hold the position continue to do so. We would not recommend adding new money for one of the following reasons: (1) many of the key catalysts have passed, (2) the trade has moved significantly toward the place we expected it to move to, or (3) there is not enough time before expiration to put on a fresh trade.

Close these trades: With this report, we close our recommendations on these trade ideas for one of the following reasons: (1) the major catalysts have passed, (2) the fundamental thesis has changed, or (3) the trade has already moved to where we thought it should.

Initial price Current price

Add to these trade recommendations: These are open trade ideas where we think there remains a good opportunity for investors to add new money. We believe the trade is still attractive, the majority of the catalysts have not yet happened and there is still a significant portion of the time to expiration.

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Exhibit 2: One page of WOW – summary of upcoming catalysts for select trade recommendations

Source: Bloomberg, Goldman Sachs Global Investment Research.

Recommended Upcoming Catalyst Options 8Q 1M 3M Brief Summary of Trade ThesisTicker Options Trade Catalyst Date Implied Average iVol iVol For more details and risks please view exhibit 1

Insieme Launch 6-Nov - -Earnings Release 13-Nov 8.1 6.7

NVDA Buy Nov-13 $15 Call Earnings Release 7-Nov 6.0 3.1 31 28 Our analyst sees short-term upside potential for shares on a solid 3Q report and in-line 4Q guidance. We recommend buying November expiration NVDA calls as option prices are inexpensive.

DNR Buy Nov-13 $19 Call Analyst Day 11-Nov - - 36 31 Our analyst expects the upcoming analyst day to be particularly significant as management plans to announce its decision regarding the corporate restructuring options it has been considering.

GWW Buy Nov-13 $270 Call Analyst Day 13-Nov - - 18 20 We recommend investors to buy GWW November calls as options are inexpensive ahead of a historically volatile analyst day.

JWN Buy Nov-13 $60 Straddle Earnings Release 14-Nov 3.5 2.1 22 21 We recommend investors position with JWN straddles as sluggish apparel datapoints ahead of the holiday season point to a particularly volatile earnings event.

GE Buy Nov-13 $26 Call Analyst Day 15-Nov - - 16 18 While GE analyst days have been historically volatile with +/- 1.8% average move (39 observations), GE Capital analyst days have been even more volatile with +/- 2.0% average move (5 recent observations).

EXP Buy Dec-13 $77.5 Call EAP Ruling Nov-13 - - 31 31 Our analyst is bullish on EXP as the frac sand permitting process is on track, with the public comment period ending on November 6. The state EPA decision is expected a few weeks thereafter.

Cyclical product pricing Q4 2013 - -Saturation of Gulf Coast 2014 - -

HFC Buy Jan-14 $46 Call 30 30 We recommend positioning for upside over the next 3 months. Our analyst belives 3Q will likely mark a bottom for shares, but sees potential for recovery on the back of multiple catalysts.

We recommend investors position with calls going into a potentially volatile period. Our analyst is positive on shares and expects upside on CSCO earnings event.

Event Move

CSCO Buy Nov-13 $23 Call 29 25

Options Insight: Stocks are pre-trading positive earnings and flat

on earnings day

Stocks have traded up more than normal ahead of earnings events on average (+1.2%

in the five days before earnings) followed by flat stock price returns on average for

earnings day. This has been the most profitable quarter in four years for our favorite

trade of owning calls from 5 days before earnings to 1 day after (+34% on average,

mid-mkt). We identify opportunities for investors to position with options ahead of

earnings events on recent underperformers including NVDA, P, WDAY, PANW, and

MCP.

This is larger than the average pre-earnings performance over the past 20 quarters, and

nearly 2X the long term average, going back to 1996. We believe the strong pre-trading of

positive earnings reports and the low implied volatility environment has combined to yield

outsized gains for call buying this quarter. Buying calls on stocks during their reporting

week has returned 34% quarter-to-date, on-track to potentially be the best quarterly

performance in nearly four years.

Exhibit 3: Stocks have traded up before earnings[dark blue] but have been flat on earnings[light blue] on average in 3Q

We estimate 337 stocks with liquid options have reported as of 31-Oct

Source: Goldman Sachs Global Investment Research.

Our studies, analyzing 38,000+ earnings events since 1996, show call buying ahead of

earnings events to be the more profitable of option buying strategies. With the results of

3Q earnings season to-date we reiterate our conclusions from the study. So far, buying

calls on stocks during their reporting week has returned 34%, on-track to potentially

be the best quarterly performance in nearly four years. Year-to-date call buying ahead

of earnings events has returned 21%, the best year since 2005. Further, the positive

setup into earnings has helped push strangle buying returns to above average levels.

-2%

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Av

g

Ave

rage

Sto

ck M

ove

Avg stock move 5 days before to 1 day before earnings

Avg stock move on earnings day

Stocks trade up in the 5 days ahead of earnings

and up small on earnings; this qtr the 5 days

before were up 1.2%, but earnings day was flat.

See “Trading Events:

Earnings Volatility (part

1) July 14, 2011 for

methodology details

and general results of

our earnings study

November 5, 2013 United States

Goldman Sachs Global Investment Research 5

Exhibit 4: Call buying for earnings has seen exceptional returns quarter-to-date, while

strangle buying returns are just above long-term average levels Buy first out of the money options 5 days ahead of earnings and close 1 day after

Source: Goldman Sachs Global Investment Research.

Underperformers ahead of earnings have been outstanding performers in the

earnings period. Our historical study shows that buying calls on stocks that

underperformed the market going into their earnings event was nearly 9% greater than the

return on names that outperformed. So far this quarter, the top call buying names in our

liquid universe have been ABT (+1488%), APOL (+704%), JNJ (+686%), BP (+620%) and BLK

(+529%). Each of these underperformed the market in the two weeks leading to the

event, averaging a -3.3% performance against the S&P 500.

This week we identify 15 stocks that have underperformed the market by at least 3% over

the last two weeks, and have the potential to yield higher than average profitability on call

buying.

34%

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Average of Call buying returns AverageCall buying ahead of

earnings has

consistently

outperformed

4%

-10%

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Average of Strangle buying returns Average Strangle buying ahead

of earnings has seen

positive performance on

average



Exhibit 5: Stocks with potential to mean revert on earnings Buy rated names reporting in November; see below for more details on NVDA

Source: Goldman Sachs Global Investment Research. Data as of 4-Nov close

Position for volatility in stocks where buying options has paid off consistently. Our

historical studies of analyzing strangle buying opportunities for earnings events point to a

number of stocks which show a consistent pattern of higher volatility than is priced into the

options market. In exhibit 5 we highlight five such stocks which have returned greater than

20% profit when buying the first out-of-money strangles 5 days before earnings and closing 1

day after, at a greater than 40% hit rate over the past 18 years. This is higher than the 3%

return and 35% hit rate on the average liquid stock over the course of the entire study.

Exhibit 6: Buy strangles on stocks with consistent patterns of profitability ANF also holds an analyst day event on 6-Nov, the stock moved +11% on the last analyst day in 2011

Source: Goldman Sachs Global Investment Research. Data as of 4-Nov close

Trade 1: Buy JWN straddles ahead of November 14 earnings

Sluggish apparel datapoints ahead of the holiday season raise the potential for JWN

volatility on their upcoming earnings event. With implied volatility only in-line with

the average relative to the past year, we recommend buying November 16 expiration

$62.5 straddles for $2.3 (3.7%) to gain exposure to a big move.

Goldman Sachs Broadline Retail analyst Stephen Grambling believes that the

upcoming JWN earnings release has higher swing potential than normal. He feels

sentiment is tepid across all department stores given recent sluggish apparel industry data

points, but his FY13 EPS of $3.68 still sits at the high end of management’s $3.60-$3.70

2wk Perf.Last vs Earnings Implied 8Q Avg Implied - Implied %-ile

Ticker Company Rating Price ($) S&P 500 Date Move (%) Move (%) 8Q Avg Volatility RankMTOR Meritor B 6.79 (16%) 13-Nov 14.2 8.9 5.3 77 97

NTAP NetApp N 38.74 (8%) 13-Nov 8.3 6.2 2.1 35 64

NVDA Nvidia N 14.82 (8%) 7-Nov 6.0 3.1 2.8 31 50

LGF Lions Gate N 34.94 (8%) 8-Nov 6.8 4.5 2.3 42 98

P Pandora B 25.67 (7%) 18-Nov 17.8 14.2 3.6 76 78

NUAN Nuance Comm N 15.98 (7%) 25-Nov 10.3 7.7 2.5 51 98

WDAY Workday N 77.19 (6%) 28-Nov 10.6 1.6 9.0 38 38

PANW Palo Alto B 42.44 (5%) 26-Nov 10.9 4.9 5.9 51 83

MCP Molycorp N 5.07 (5%) 7-Nov 7.6 13.7 -6.2 67 20

MDRX Allscripts N 14.53 (5%) 7-Nov 9.4 11.4 -1.9 41 63

DLTR Dollar Tree B 57.96 (4%) 21-Nov 4.1 3.9 0.3 23 17

BZH Beazer Homes N 18.00 (4%) 7-Nov 8.7 4.8 3.9 52 72

NRG NRG Energy N 28.25 (3%) 12-Nov 3.5 1.9 1.7 30 73

ARUN Aruba N 18.57 (3%) 21-Nov 9.8 10.8 -1.0 49 59

FWLT Foster Wheeler N 27.50 (3%) 7-Nov 7.7 6.0 1.7 37 83

1-mon

Last Earnings Implied 8Q Avg Implied - Implied %-ileTicker Company Rating Price ($) Return Hit Rate Date Move (%) Move (%) 8Q Avg Volatility RankWFM Whole Foods B 63.49 41% 61% 6-Nov 7.3 6.6 0.7 32 89

SHLD Sears Holdings NC 60.86 29% 41% 21-Nov 12.1 9.8 2.3 60 93

ANF Abercrombie & Fitch N 38.21 26% 41% 21-Nov 14.7 13.6 1.1 66 98

DIS Walt Disney N 68.81 24% 47% 7-Nov 4.0 2.2 1.8 21 62

PRU Prudential Financial B 81.57 23% 41% 6-Nov 4.1 4.2 -0.1 25 60

Historical Profitability1-mon



guidance. If sales continue to remain weak, he sees management reigning in SG&A to limit

the damage to the bottom line. By contrast, flat-to-positive comps would represent a

meaningful upside surprise amidst the current apparel environment. Earnings reports from

peers Macy’s (M, November 13) and Kohls (KSS, November 14) could also move JWN even

before their own earnings report.

JWN option prices are inexpensive ahead of potentially volatile November 14

earnings release. We recommend buying the November straddle to capture the earnings

volatility of JWN as well as peers. JWN 1 month implied volatility of 22 is only at 1-year

average levels and 3 points below the average level in the past two years. JWN shares

have moved an average of +/-2% on earnings-day for the past eight events, but we see the

potential for a much larger move this quarter. Straddle buyers risk losing the premium paid

if the shares close at the strike price on expiration.

Trade 2: Buy NVDA calls to position for solid earnings relative to

peers

Goldman Sachs Semiconductors analyst James Schneider sees short-term upside

potential for shares on a solid 3Q report and in-line 4Q guidance. Options prices are

low ahead of the report on Thursday and, we recommend buying November 16

expiration $15 calls for $0.34 (2.3%, stock $14.80).

Our analyst expects Nvidia to report 3Q sales in the upper half of guidance, with upside

driven by trends in the overall PC graphics market (IDC data shows PC units up 8% qoq)

and growth in the workstation business (on solid industrial growth). Given weak reports

from most semi companies which have reported this quarter, our analyst expects the stock

to trade higher if it reports a relatively healthy quarter. Nvidia’s step-up in cash returns to

shareholders (via the dividend and repurchase) is a clear positive for the stock. Given that it

is the first earnings call with new CFO Colette Kress, we could also see higher volatility

than normal. For more details on our analysts’ expectations, see “NVDA, AEIS, and ARX

earning previews; short interest update,” published November 3, 2013.

NVDA 1-month implied volatility is 5 points below its 2-year average; Buy November

$15 calls for $0.34 (2.3%, stock $14.80). NVDA option prices are inexpensive ahead of

upcoming earnings release. NVDA has underperformed S&P500 by 8% in the past two weeks.

Our 18+ year study analyzing 38,000 earnings events shows that call buying on stocks that

have underperformed the market ahead of their earnings has produced a 20% return on

premium, nearly double the return on premium from buying calls on the average stock. Call

buyers risk losing the premium paid if the stock closes below the strike price on expiration.

Trade 3: Buy CSCO calls ahead of product launch (Nov 6) and

earnings (Nov 13)

Option prices are low and Goldman Sachs Telecom Equipment analyst Simona

Jankowski expects shares to trade up on earnings. We recommend buying calls to

position for upside volatility.

Insieme product launch (06-Nov): CSCO is set to unveil its much anticipated Insieme

product at an event in NYC headlined by CEO. We expect Insieme launch to include a 100G

cloud data center switching fabric with industry-leading “speeds and feeds” as part of its

Application-Centered Infrastructure. The key focus will be on how Insieme is positioned



relative to Nexus and what customers are announced. Our analyst believes if Cisco is able

to significantly leap-frog competitors and the emerging “white box” ecosystem in terms of

raw performance, then Web 2.0 customers will likely seriously consider Insieme even if it

carries some premium.

Earnings (13-Nov): CSCO shares have moved an average of +/- 7% on the past eight

earnings events. CSCO shares have underperformed S&P500 by 7% over the past month

and we see the potential for the stock to mean revert on earnings release. Our analyst sees

the potential for this earnings reporting season to be more volatile than normal for the

enterprise networking sector, including Cisco.

On October 23, we recommended investors to buy CSCO straddles as options are

underestimating volatility on earnings on November 13 as well as the Insieme launch

on November 6. The straddle was recently $1.36 (stock $23.07) relative to our

recommendation to buy for $1.53 (stock $22.65). We recommend investors close out the

November $23 put options on the trade for $0.63 (2.7%, stock $23.07) while keeping on the

November $23 call options. We still see upside for the same reasons as before, but want to

reposition for optimal exposure to the earnings upside. Call buyers risk losing the premium

paid if the stock closes below the strike price on expiration.

Trade 4: Buy GWW calls ahead of analyst day on Nov 13

Despite historically stock-moving analyst day, GWW options prices have declined

dramatically since earnings on 16-Oct. We recommend buying GWW Nov 16 $270

calls for $2.65 (1.0%, stock $268.96)

We recommend investors buy GWW November $270 calls for $2.65 (1.0%, stock

$268.96) as options trade inexpensive ahead of a historically volatile analyst day. On

the past 11 analyst days on record, the stock averaged a +/-2% move on the day of the

event. Shares also have reacted positively to analyst days in 6 of those 11 events. Since

earnings on 16-October, 1-month implied volatility on the stock has declined 8 points to

18%. Current 1-month implied volatility is 2 points below the average level in the past year.

We believe the options market has overlooked the upcoming analyst day. Call buyers risk

losing their premium paid.

Trade 5: Upcoming analyst days in November

With more than two-thirds S&P 500 companies having reported Q3 earnings, we

believe investors should look forward to the next major catalysts on the single stock

level. We continue to highlight analyst days in November as potential sources of volatility.

Our long term study of analyzing over 3800+ analyst days shows the options market tends

to underestimate volatility on analyst days. Since 2002, buying calls 5 days prior to an

analyst day and closing 1 day after has returned an average profit of 23% (mid-market).

Among the trades we prefer to highlight, we have live trade recommendation on HAL,

MON, MCD, and GWW. Additionally, we recommend investors buy RVBD December

$16 calls for $0.63 (4.1%, stock $15.33), UAL December $36 calls for $1.67 (4.7%, stock

35.53) and SAP December $80 calls for $1.15 (1.5%, stock $77.78) to position for their

upcoming analyst days.

In exhibit 7 we highlight our top recommendations where options are pricing below

average volatility going into the event. We also highlight names where the analyst day is

being held at least a month after the last earnings event. Our study shows that buying calls



for an event being held at least a month after earnings is 2X as profitable as a similar

strategy for an event held 5-10 days after earnings.

Exhibit 7: Top options buying opportunities for November analyst days

1 month implied volatility, recent prices for call options that capture the analyst day

Source: Reuters, Goldman Sachs Global Investment Research.

Financial advisory disclosures

Goldman Sachs is acting as a financial advisor in connection with an announced strategic

matter involving the following companies or one of its affiliates: Ingersoll-rand Plc; Sears

Holdings Corporation.

Ticker CompanyAnalyst

Day

days since

last

earnings

Avg.

Analyst day

move

1-m

vol

%-ile

rank

last

pricestrike expiry cost ($) cost (%)

ERIC Ericsson (ADR) 6-Nov 13 1.7% 24 15 11.86 12.00 Nov-13 0.15 1.3

HAL Halliburton 6-Nov 16 3.7% 25 34 53.13 55.00 Nov-13 0.33 0.6

MON Monsanto 6-Nov 35 2.3% 21 49 103.22 110.00 Nov-13 0.15 0.1

WTW Weight Watchers 6-Nov 7 14.9% 32 33 33.92 35.00 Nov-13 0.40 1.2

SWI SolarWinds 7-Nov 9 2.8% 34 33 36.45 37.50 Nov-13 0.55 1.5

WSO Watsco 8-Nov 23 1.2% 21 31 96.16 100.00 Nov-13 0.40 0.4

AEGR Aegerion Pharma 8-Nov 9 2.8% 59 38 82.76 85.00 Nov-13 2.40 2.9

AMD Advanced Micro Devices 11-Nov 25 4.1% 52 13 3.33 4.00 Nov-13 0.02 0.6

BC Brunswick 12-Nov 19 2.5% 32 12 46.19 47.00 Nov-13 0.75 1.6

DBD Diebold 12-Nov 13 0.6% 23 46 29.28 30.00 Nov-13 0.25 0.9

IR Ingersoll-Rand 12-Nov 25 2.1% 21 28 67.52 67.50 Nov-13 1.05 1.6

XRX Xerox 12-Nov 19 3.3% 24 29 10.28 10.00 Nov-13 0.37 3.6

GWW W.W. Grainger 13-Nov 28 1.9% 18 26 268.96 270.00 Nov-13 2.65 1.0

ALK Alaska Air Group 14-Nov 21 1.6% 28 43 72.42 75.00 Nov-13 0.45 0.6

FFIV F5 Networks 14-Nov 22 1.9% 33 39 79.74 80.00 Nov-13 1.69 2.1

MCD McDonald's 14-Nov 24 1.6% 11 1 97.41 95.00 Nov-13 2.57 2.6

GE General Electric 15-Nov 28 1.8% 16 32 26.42 26.00 Nov-13 0.59 2.2

RVBD Riverbed Tech 18-Nov 21 5.3% 41 32 15.33 16.00 Dec-13 0.63 4.1

UAL United Continental 19-Nov 26 2.2% 37 44 35.52 36.00 Dec-13 1.67 4.7

GDOT Green Dot 20-Nov 20 na 39 31 23.75 25.00 Dec-13 0.85 3.6

SAP SAP 20-Nov 30 4.3% 19 1 77.78 80.00 Dec-13 1.15 1.5

CBG CBRE Group 21-Nov 23 0.8% 27 24 22.87 23.00 Dec-13 0.85 3.7

FHN First Horizon National 21-Nov 34 0.3% 22 6 11.00 11.00 Dec-13 0.40 3.6

INTC Intel 21-Nov 37 1.3% 17 4 24.03 25.00 Dec-13 0.22 0.9

CYT Cytec Industries 22-Nov 36 5.2% 20 8 83.15 85.00 Dec-13 1.75 2.1

average 23 2.9% 26 2.0



Disclosure Appendix

Reg AC

We, John Marshall and Katherine Fogertey, hereby certify that all of the views expressed in this report accurately reflect our personal views about the

subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly,

related to the specific recommendations or views expressed in this report.

Disclosures

Option Specific Disclosures

Price target methodology: Please refer to the analyst’s previously published research for methodology and risks associated with equity price

targets.

Pricing Disclosure: Option prices and volatility levels in this note are indicative only, and are based on our estimates of recent mid-market

levels(unless otherwise noted). All prices and levels exclude transaction costs unless otherwise stated.

General Options Risks – The risks below and any other options risks mentioned in this research report pertain both to specific derivative trade

recommendations mentioned and to discussion of general opportunities and advantages of derivative strategies. Unless otherwise noted, options

strategies mentioned in this report may be a combination of the strategies below and therefore carry with them the risks of those strategies.

Buying Options - Investors who buy call (put) options risk loss of the entire premium paid if the underlying security finishes below (above) the

strike price at expiration. Investors who buy call or put spreads also risk a maximum loss of the premium paid. The maximum gain on a long call or

put spread is the difference between the strike prices, less the premium paid.

Selling Options - Investors who sell calls on securities they do not own risk unlimited loss of the security price less the strike price. Investors who

sell covered calls (sell calls while owning the underlying security) risk having to deliver the underlying security or pay the difference between the

security price and the strike price, depending on whether the option is settled by physical delivery or cash-settled. Investors who sell puts risk loss of

the strike price less the premium received for selling the put. Investors who sell put or call spreads risk a maximum loss of the difference between the

strikes less the premium received, while their maximum gain is the premium received.

For options settled by physical delivery, the above risks assume the options buyer or seller, buys or sells the resulting securities at the

settlement price on expiry.

Company-specific regulatory disclosures

Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this

compendium can be found in the latest relevant published research

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 31% 54% 15% 50% 42% 37%

As of October 1, 2013, Goldman Sachs Global Investment Research had investment ratings on 3,570 equity securities. Goldman Sachs assigns stocks

as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell

for the purposes of the above disclosure required by NASD/NYSE rules. See 'Ratings, Coverage groups and views and related definitions' below.

Price target and rating history chart(s)

Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this

compendium can be found in the latest relevant published research

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager

or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-

managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs usually makes a

market in fixed income securities of issuers discussed in this report and usually deals as a principal in these securities.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,

professionals reporting to analysts and members of their households from owning securities of any company in the analyst's area of

coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking

revenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their

households from serving as an officer, director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of Goldman, Sachs & Co. and therefore may not be subject to NASD Rule 2711/NYSE

Rules 472 restrictions on communications with subject company, public appearances and trading securities held by the analysts.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States

The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws

and regulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is defined in

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Where applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 16 of CVM Instruction

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Analysts may conduct site visits but are prohibited from accepting payment or reimbursement by the company of travel expenses for such



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Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons who would be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Conduct

Authority, should read this research in conjunction with prior Goldman Sachs research on the covered companies referred to herein and should refer

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Investment Research.

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disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese

Securities Finance Company.

Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy

or Sell on an Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned as

a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional Investment Lists to a

global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular coverage

group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment

recommendations focused on either the size of the potential return or the likelihood of the realization of the return.

Return potential represents the price differential between the current share price and the price target expected during the time horizon associated

with the price target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated in each

report adding or reiterating an Investment List membership.

Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at

http://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst's investment outlook

on the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12

months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the

following 12 months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over

the following 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation.

Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an

advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman

Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for

determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and

price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended

coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The

information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.

Global product; distributing entities

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research in connection with its distribution in the United Kingdom and European Union.

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and the Prudential Regulation Authority, has approved this research in connection with its distribution in the European Union and United Kingdom;

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This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we

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majority of reports are published at irregular intervals as appropriate in the analyst's judgment.

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Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our

proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, our

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The analysts named in this report may have from time to time discussed with our clients, including Goldman Sachs salespersons and traders, or may

discuss in this report, trading strategies that reference catalysts or events that may have a near-term impact on the market price of the equity

securities discussed in this report, which impact may be directionally counter to the analyst's published price target expectations for such stocks. Any

such trading strategies are distinct from and do not affect the analyst's fundamental equity rating for such stocks, which rating reflects a stock's

return potential relative to its coverage group as described herein.

We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in,

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Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors.

Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives or at

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and sales of options such as spreads. Supporting documentation will be supplied upon request.

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