Earnings Season Trading Strategy: Goldman Recommends Options for Higher Returns

Earnings season is approaching, and Goldman Sachs analysts are highlighting ways to trade it.

Options pricing currently suggests traders expect the average S&P 500 stock to move about 4.5% after earnings, near the lowest implied volatility levels in two decades.

By contrast, just two quarters ago the average S&P 500 stock moved 5.4% on earnings, the highest volatility since 2009. Goldman argues this gap reflects expectations for a calmer season, but they maintain that the fundamental drivers of earnings volatility remain intact.

Why This Matters

Earnings reports are powerful market catalysts that can either strengthen or weaken investor confidence in a company.

By using options strategies, investors can manage risk more effectively reducing the cost of adding to positions or closing them after earnings announcements. This approach allows traders to capitalize on volatility while protecting against downside moves.

Sector-Level Insights

• Goldman sees the strongest post-earnings volatility opportunities in utilities, healthcare, materials, and industrials. Utilities have shown unusually high volatility in recent quarters.
• Volatility has eased in most other sectors, including tech, over the past year.

Market Outlook

• Goldman expects more upside than downside this earnings season.
• Their S&P 500 earnings estimates rose 5%, and their price target increased 8% in the past three months, while the index itself rose only 3%—suggesting fundamentals are improving faster than prices.
• Individual investors were aggressive buyers of single stocks and ETFs, which Goldman views as a positive for forward equity performance.

Stock-Level Strategy

• Goldman identified 25 stocks with “out-of-consensus” earnings views—where their outlook differs from the average Wall Street analyst.
• These stocks represent the most potential for traders to profit from options strategies during earnings season.

Key Insights

• Goldman recommends buying single stock options to capture earnings-day volatility this quarter.
• Upside candidates: Meta Platforms (META), UnitedHealth Group (UNH), Arista Networks (ANET), and Robinhood (HOOD). Traders could benefit from just out-of-the-money call options if earnings beat expectations.
• Downside risks: Texas Instruments (TXN) and Southwest Airlines (LUV), where margin pressure may weigh on performance. Traders could profit from slightly out-of-the-money put options if results disappoint.

Goldman Sachs sees earnings season as a prime opportunity for options traders. With implied volatility near 20-year lows, they argue the market is underpricing potential stock moves. Their analysts highlight upside opportunities in names like Meta, UnitedHealth, Arista Networks, and Robinhood, while warning of downside risks for Texas Instruments and Southwest Airlines. Sector-level plays in utilities, healthcare, materials, and industrials also stand out. For investors, the message is clear: options strategies can help capture earnings-driven volatility while managing risk.