Analysts at Goldman Sachs suggest to clients the acquisition of options during the July preannouncement period to benefit from potential stock price fluctuations that may arise from unexpected occurrences. The analysis, published on Wednesday, indicates that investors may not fully comprehend the volatility connected with preannouncements.
As per historical data, nearly 600 preannouncements have already occurred this year, resulting in an average stock price variation of approximately +/- 6.7% within the two days surrounding the announcement. Notably, 57% of these preannouncements have resulted in positive stock movements this year.
Goldman Sachs stresses that sectors such as Technology, Healthcare, and Consumer Discretionary often witness a significant number of preannouncements in July. The analysts feel that investors are underestimating the volatility associated with these events, which frequently happen without a fixed timetable.
To benefit from the anticipated market turbulence, Goldman has pinpointed various stocks known for preannouncing earnings in July. They have specifically highlighted the Semicon West event (July 9-11) as a potential catalyst for semiconductor stocks like Applied Materials (NASDAQ) and AMD (NASDAQ).
Moreover, in addition to broader industry patterns, the report presents four distinct “catalyst-based idiosyncratic trades:”
Starbucks (NASDAQ): Goldman suggests buying calls ahead of the earnings reveal on July 30th. The bank’s analysts perceive this as a chance given SBUX’s recent lackluster performance and predicted growth in the forthcoming quarters.
Chipotle Mexican Grill (NYSE): Goldman proposes acquiring straddles before the earnings announcement on July 24th. Despite apprehensions about short-term sentiment, analysts are optimistic about CMG’s long-term growth potential.
Wells Fargo (NYSE): Goldman is recommending the purchase of calls in anticipation of the earnings disclosure on July 12th. Analysts foresee potential upward movement in WFC’s 2024 outlook due to loan and deposit expansion, coupled with probable regulatory shifts.
Goldman Sachs’ approach showcases their confidence in the significant trading openings offered by these forthcoming events, for investors willing to leverage options to navigate the expected market instability.
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