Investors should use options to hedge against the rising prospects of Elizabeth Warren’s bid for the Democratic presidential nomination as that risk seems to be underestimated in the market, according to Goldman Sachs Group Inc.

Options on the $17 billion Health Care Select Sector SPDR Fund, known by its ticker XLV, are particularly attractive, analysts led by John Marshall wrote in a research note. The fund’s implied volatility, a gauge of options prices, is around a five-year low compared with the S&P 500, the firm’s data showed.

Health-care shares have trailed the market this year amid concern potential regulations on drug pricing will hurt industry profits. A weekend poll showed Warren, the senator from Massachusetts who supports replacing private health-insurance with a government-run system, in a statistical tie with former Vice President Joe Biden, who favors a more conservative approach that would keep private insurance and include a public option.

That’s creating “incremental fundamental uncertainty” for health-care investors, Marshall wrote, noting that shares of health insurers in particular have started to show a strengthening relationship with Warren’s rise. “Healthcare is likely to have an outsized reaction to swings in election sentiment.”

The analysts recommend using an at-the-money straddle strategy -- buying equal numbers of calls and puts with the same strike price and expiration date -- to take advantage of any increase in volatility. Specifically, they advise buying the November $92 XLV calls and puts at $3.83 for each contract.

“These options capture the Oct. 15-16 Democratic debates and may capture a November debate,” the analysts wrote.

They also advise investors to “own volatility” in individual stocks ahead of specific catalysts. Those to watch before the year ends include:

This article provided by Bloomberg News.