How to Trade the Next Earnings Season? Goldman Says Try Options

• Goldman expects upside surprises at Meta, UnitedHealth Group, Arista Networks, and Robinhood, recommending investors buy call options on these stocks ahead of earnings
• Texas Instruments and Southwest Airlines face potential downside from margin pressure, creating opportunities for put option strategies
• Current implied earnings volatility is near 20-year lows at 4.5% average move per stock, despite Goldman's view that fundamental drivers of volatility remain intact

Summary: Goldman Sachs Recommends Options Trading for Earnings Season

Goldman Sachs strategists are advising investors to use options strategies for the upcoming fourth-quarter earnings season, arguing that markets are significantly underpricing post-earnings volatility.

Key Market Insight

Options pricing currently suggests the average S&P 500 stock will move 4.5% after earnings announcements—near the lowest implied volatility level in 20 years. This contrasts sharply with just two quarters ago, when average post-earnings moves reached 5.4%, the highest volatility since 2009.

Investment Rationale

Goldman believes fundamental drivers of earnings volatility remain intact. Supporting this bullish outlook, Goldman's S&P 500 earnings estimates rose 5% and price targets increased 8% over the past three months, while the index itself only gained 3%. This gap suggests fundamentals have outpaced stock price appreciation. Additionally, retail investors have been aggressive buyers of single stocks and ETFs, which Goldman views as positive for forward equity performance.

Sector Focus

The firm identifies utilities, healthcare, materials, and industrials as sectors with the greatest opportunity for post-earnings volatility. Utilities have been particularly volatile in recent quarters.

Specific Trading Opportunities

Expected upside surprises: Goldman recommends buying call options on Meta Platforms, UnitedHealth Group, Arista Networks, and Robinhood, expecting these companies to beat earnings expectations.

Expected downside pressure: The firm anticipates margin pressure will negatively impact Texas Instruments and Southwest Airlines, suggesting traders consider out-of-the-money put options on these stocks.

Goldman identified 25 stocks where their earnings views differ significantly from consensus, representing what they believe are the best opportunities for options traders this earnings season.