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Wall Street is heading into a long weekend, but when bankers return to work on Monday, earnings season will be in full swing — with a lot of potential targets for options traders. “We expect single stock call buying to be an unusually profitable strategy this earnings season given 1) Put-buying pressure in single stocks remains at extreme levels despite last Wednesday’s equity rally and tends to be a signal that earnings-day relief rallies are likely, 2) Earnings-day implied moves near 15-year highs suggest investors are unusually nervous ahead of earnings events, and 3) The average upside to our analysts’ price targets has reached its second highest level in 12 years,” Goldman Sachs head of derivatives research John Marshall said in a note to clients. Call buying is a form of options trading that bets on stocks to move higher. A call option gives the holder the ability to buy a stock at a pre-set strike price, and the trade makes a profit when the stock rises above that strike price by enough to offset the cost of the contract. Marshall’s note listed stocks that have a buy rating from Goldman Sachs and have the highest implied returns from buying three-month call options where the strike price is equal to the current share price, or “at the money.” Some of the stocks on the list report earnings next week, including Thermo Fisher Scientific and Danaher . Other notable trade ideas on the list include Adobe , Walt Disney and Salesforce . Those three companies will release earnings later in the season. The implied return shown below shows the reward if the stock reaches the price target from a Goldman Sachs analyst before the call option expires in July, assuming the contract is executed at that point. If the stock never trades above the strike price, the contract will expire and the call holder will lose the premium paid for the option. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange!| Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
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