How to Trade the Next Earnings Season: Goldman Sachs Recommends Trying Options for Bigger Gains
- Research suggests that options can help capture bigger stock moves during earnings, as implied volatility often underestimates actual swings.
- Focusing on sectors like utilities and healthcare could offer more opportunities due to expected high volatility.
- Evidence suggests using strategies such as buying calls for stocks poised to beat estimates, while acknowledging the risks associated with market uncertainties.
- The economic outlook, with modest growth forecasted by global bodies, supports steady corporate earnings but highlights potential for surprises.
Why Earnings Season Matters
Earnings season is that time of year when companies share their financial results, and stock prices can jump or drop quickly. Goldman Sachs, a big name in finance, thinks options are a smart way to handle the next one. They say the market might not be ready for how much stocks could move after earnings reports. This could mean chances to make money if you play it right, but remember, trading involves risks, and not everyone wins.
Goldman’s View on Volatility
Goldman points out that options prices now suggest stocks will move about 4.5% after earnings, which is low compared to history. But in recent quarters, actual moves were bigger, like 5.4%. So, they recommend using options to bet on larger swings. This approach can be exciting for traders looking for action.
Basic Options Strategies for Beginners
If you’re new, start with simple ideas. Buy call options if you think a stock will go up after good earnings, or put options if you expect bad news. More advanced folks might use straddles, buying both calls and puts to profit from any big move. Always check the implied volatility – high levels mean pricier options, but also bigger potential payouts.
For more on basic strategies, see Investopedia’s Options Basics.
Economic Context from Experts
The Federal Reserve expects solid growth and possible rate cuts in 2026, which could boost company profits. This ties into why earnings might surprise. Keep an eye on these trends to inform your trades.
Have you ever wondered why some traders make a fortune during earnings season while others sit on the sidelines? It’s all about understanding the buzz around company reports and using clever tools like options to your advantage. In this detailed guide, we’ll dive deep into how to trade the next earnings season, drawing on advice from Goldman Sachs, which suggests trying options for potentially bigger gains. We’ll cover everything from the basics to advanced tips, backed by real stats and examples, so you can approach the market with confidence.
Earnings season happens four times a year, when publicly traded companies release their quarterly financial results. These reports can cause stock prices to swing wildly – up if the news is good, down if it’s bad. According to Goldman Sachs, the next season could be particularly interesting because the market’s expectations for these swings (known as implied volatility) are lower than what might actually happen. According to their analysis, implied post-earnings moves for S&P 500 stocks sit around 4.5%, near a 20-year trough, despite historical data showing that realized volatility is often higher. Exceed this, like the 5.4% average two quarters ago.
Imagine you’re a farmer checking the weather forecast – if it says mild rain but a storm hits, you’re caught off guard. That’s similar to volatility in earnings. Goldman Sachs strategists, led by experts like John Marshall, warn of a volatility gap where real swings could catch the market by surprise. This gap creates opportunities for options traders who can bet on larger movements without needing to predict the direction perfectly.
To set the stage, let’s look at the broader economic picture. The International Monetary Fund (IMF) projects global growth at 3.1% for 2026, up slightly from 3.0% in 2025, driven by recovering economies in emerging markets. Meanwhile, the World Bank forecasts a slowdown to 2.3% in 2025 with a tepid recovery in 2026-27, citing risks from trade tensions and geopolitical issues. The Federal Reserve anticipates US GDP growth of around 2.1% in 2026, with possible interest rate cuts if inflation cools further. These trends suggest corporate earnings could remain strong, with Goldman forecasting 11% returns for global stocks, mostly driven by profit growth. However, uncertainties like AI-driven productivity or trade policies could lead to surprises in individual company reports.
In a world where asset values are rising and corporate earnings are up 11% year-over-year, as per recent data, traders need to be prepared. That’s where options come in – they let you leverage these moves with limited capital. But remember, options can expire worthless, so education is key.