Lehman Brothers is pitching to clients basket equity option trades designed to profit from sectors expected to outperform and under perform the Standard & Poor's 500 when the index has bottomed out but the economy is not in recession. Paul Lieberman, v.p.-equity derivatives and quantitative research at Lehman in New York, said sectors including investment banks/brokerage houses, airlines, and networking technology stocks have since 1962 tended to perform well in the six months following non-recession related S&P 500 lows. Conversely, sectors such as gold and precious metals, and engineering and construction typically under perform under these conditions.
Lehman suggests buying a basket call option on a series of stocks in a sector expected to outperform, or buying a basket put option on a series of stocks in a sector expected to under perform, Lieberman said.
