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

Core Insights - Earnings season is approaching, with Goldman Sachs analysts suggesting that traders expect the average S&P 500 stock to move 4.5% post-earnings, indicating low implied volatility compared to historical levels [2][3] - Despite the low expectations, Goldman believes that fundamental drivers of earnings volatility remain intact [3] Sector Analysis - Goldman identifies utilities, healthcare, materials, and industrials as sectors with the most potential for post-earnings volatility, with utilities showing abnormal volatility in recent quarters [5] - In contrast, volatility has decreased in most other sectors, including technology, over the past year [5] Earnings Estimates and Stock Performance - Goldman has raised its S&P 500 earnings estimates by 5% and its price target for the index by 8% over the past three months, while the index itself only rose 3%, suggesting that improvements in fundamentals are outpacing stock price increases [6] - Individual investors have been aggressive buyers of single stocks and ETFs, which is viewed positively for future equity performance [6] Investment Opportunities - Goldman has identified 25 stocks with "out-of-consensus" earnings views, indicating potential for traders to profit from options strategies [6] - Notable companies expected to surprise positively include Meta Platforms, UnitedHealth Group, Arista Networks, and Robinhood, where buying out-of-the-money call options could be beneficial [8] - Conversely, Texas Instruments and Southwest Airlines are expected to face margin pressure, suggesting that buying slightly out-of-the-money put options could be profitable if their earnings disappoint [9]