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The looming threat of a U.S. government shutdown could rattle global markets this summer but may also create an opportunity for options traders to profit, according to Goldman Sachs. The investment bank’s derivatives research team said in a note to clients Wednesday the timeline for a government shutdown is potentially accelerating and parts of the options market have not priced in the potential effects. “Our economists expect Treasury to set a late-July deadline to Congress for increasing the debt limits as a base case but see odds of an early June deadline rising. This political and economic uncertainty related to the U.S. Congress extending the debt limits may lead to short-term volatility in the financial markets,” the Goldman report said. The debt ceiling debate is now front and center in Washington. Treasury Secretary Janet Yellen has warned the U.S. could exhaust the emergency measures to pay its bills as early as June 1 because of weak tax receipts. Congressional leaders met with President Joe Biden on Tuesday to discuss the issue, but House Speaker Kevin McCarthy, R-Calif., told reporters he did not see ” any new movement ” during the talks. As the deadline gets closer , investors in companies that rely heavily on government spending may get nervous. The Goldman team looked at a basket of stocks that have more than 20% revenue exposure to U.S. government spending and found a few health care names whose stock options are pricing in relatively low volatility. Those names include drugmakers AbbVie and Merck and insurer UnitedHealth . All three stocks could be hurt by potential cuts or disruptions to government health care spending. Shares of Merck have been a big winner for investors lately, jumping 33% over the past year, while UnitedHealth and AbbVie have both retreated in recent weeks. MRK 1Y mountain Merck’s stock has climbed more than 30% over the past 12 months. One way to play the potential future volatility in these stocks is through an options strategy using so-called straddles. These derivatives serve as both a put option and a call option on the same stock, with the same strike price and expiration date for each leg of the trade. With a straddle, an investor can benefit from big moves in a stock regardless of direction, and losses are capped at the upfront cost of the options contract. Goldman highlighted the July 21 straddles in the note, which would let investors capture any volatility through most of the projected debt limit standoff. — CNBC’s Michael Bloom contributed reporting.
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