According to Goldman Sachs, now is a good time for options traders to look for profitable days, since the first-quarter results season is over.
According to a report from Goldman’s derivatives research team “The higher profitability has been driven by the 140 [basis point] average return in stocks around analyst days, which is well above the long term average of 60 [basis point], indicating that analyst days will be an important source of alpha in 2021. With earnings season coming to an end and investor attention shifting away from the pandemic-driven macro environment and toward alpha generation via micro stories, we see analyst days as an important source of idiosyncratic returns,” the note said.
Goldman singled out two stocks in particular where upcoming analyst days provided opportunities for profitable options trades.
The first was UPS, which is hosting an event on June 9. According to Goldman, transportation analyst Jordan Alliger believes UPS is improving its margins in the short term and is about to reveal why that improvement can continue in the long term.
“At the upcoming analyst day, he anticipates UPS to provide details on potential growth levers over the next three years. The company is currently working on non-operating cost reductions and plans to implement Transformation 3.0, which will focus on operating and network efficiencies,” according to the note.
When the note was published last week, the firm recommended purchasing June call options with a strike price of $212.50, which were slightly out of the money. A call option that is out-of-the-money has a strike price that is higher than the last traded price.
The trader pays a fee for the right to buy the stock at a predetermined price before the expiration date with call options. If the stock rises above the set price, the trader has the option to purchase it at a below-market price. The trader puts the premium paid to purchase the options contract at risk.
Goldman also advised purchasing call options on Sherwin-Williams ahead of the company’s analyst day on June 8. In recent years, shares of the paint manufacturer have seen significant moves following analyst days, but this does not appear to be priced into the market.
“Notably, option prices on SHW are now in line with the broad XLB, despite the possibility of idiosyncratic moves at the analyst day,” according to the note.
Goldman suggested purchasing the stock’s June expiration calls at $286.67. Based on where Sherwin-Williams was trading on Friday, those calls were out of the money.
BlackRock, Snowflake, and Humana are among the other notable companies hosting analyst days or similar events in June.